Inflation bites: The dynamic interdependence between financial market volatility and energy consumption during pandemic

We examine how energy production, financial systems, and the COVID-19 pandemic influence inflation, eventually offering insights into cleaner energy transition policies. Using monthly data from 108 developed and developing economies from January 2017 to December 2022, we identify three key findings. First, Currency-based inflation poses a disproportionately greater threat to developing economies than to developed nations. It limits developing economies' investment opportunities in clean energy projects and constrains the speed of green technology adoption. Second, Financial instability creates unequal access to environmental and sustainable development funding, with effects that differ between developed and developing economies. Third, Energy production affects inflation differently in developing and developed economies due to significant gaps in sustainable energy infrastructure. Our results suggest that environmental policies should adapt to each country's development level to attain both global sustainability and economic stability.