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Long-run relations in European electricity prices

✍ Scribed by Bruno Bosco; Lucia Parisio; Matteo Pelagatti; Fabio Baldi

Publisher
John Wiley and Sons
Year
2009
Tongue
English
Weight
261 KB
Volume
25
Category
Article
ISSN
0883-7252

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✦ Synopsis

Abstract

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of a robust multivariate long‐run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of a common long‐term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across Europe and by the same marginal generation technology. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we also develop a battery of robust inference procedures that should assure the reliability of our results. Copyright Β© 2009 John Wiley & Sons, Ltd.

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