Causal modeling and inference for electricity markets
AbstractHow does dynamic price information flow among Northern European electricity spot prices and prices of major electricity generation fuel sources? We use time series models combined with new advances in causal inference to answer these questions. Applying our methods to weekly Nordic and German electricity prices, and oil, gas and coal prices, with German wind power and Nordic water reservoir levels as exogenous variables, we estimate a causal model for the price dynamics, both for contemporaneous and lagged relationships. In contemporaneous time, Nordic and German electricity prices are interlinked through gas prices. In the long run, electricity prices and British gas prices adjust themselves to establish the equilibrium price level, since oil, coal, continental gas and EUR/USD are found to be weakly exogenous.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 33 (2011)
Issue (Month): 3 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eneco
Vector autoregression Vector error correction Electricity markets Causal discovery Non-Gaussianity Directed acyclic graph Non-experimental data;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990.
"Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?,"
Papers, Michigan State - Econometrics and Economic Theory
8905, Michigan State - Econometrics and Economic Theory.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Panagiotidis, Theodore & Rutledge, Emilie, 2007. "Oil and gas markets in the UK: Evidence from a cointegrating approach," Energy Economics, Elsevier, Elsevier, vol. 29(2), pages 329-347, March.
- Mjelde, James W. & Bessler, David A., 2009. "Market integration among electricity markets and their major fuel source markets," Energy Economics, Elsevier, Elsevier, vol. 31(3), pages 482-491, May.
- Marckhoff, Jan & Wimschulte, Jens, 2009. "Locational price spreads and the pricing of contracts for difference: Evidence from the Nordic market," Energy Economics, Elsevier, Elsevier, vol. 31(2), pages 257-268, March.
- Hovanov, Nikolai V. & Kolari, James W. & Sokolov, Mikhail V., 2004. "Computing currency invariant indices with an application to minimum variance currency baskets," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(8), pages 1481-1504, June.
- Park, Haesun & Mjelde, James W. & Bessler, David A., 2006. "Price dynamics among U.S. electricity spot markets," Energy Economics, Elsevier, Elsevier, vol. 28(1), pages 81-101, January.
- Zhang, Yue-Jun & Fan, Ying & Tsai, Hsien-Tang & Wei, Yi-Ming, 2008. "Spillover effect of US dollar exchange rate on oil prices," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(6), pages 973-991.
- Shimizu, Shohei & Hyvarinen, Aapo & Hoyer, Patrik O. & Kano, Yutaka, 2006. "Finding a causal ordering via independent component analysis," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 50(11), pages 3278-3293, July.
- Chen, Shiu-Sheng & Chen, Hung-Chyn, 2007. "Oil prices and real exchange rates," Energy Economics, Elsevier, Elsevier, vol. 29(3), pages 390-404, May.
- Weigt, Hannes & Hirschhausen, Christian von, 2008. "Price formation and market power in the German wholesale electricity market in 2006," Energy Policy, Elsevier, vol. 36(11), pages 4227-4234, November.
- Bernanke, Ben S., 1986.
"Alternative explanations of the money-income correlation,"
Carnegie-Rochester Conference Series on Public Policy, Elsevier,
Elsevier, vol. 25(1), pages 49-99, January.
- Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
- Q. Farooq Akram, 2008.
"Commodity prices, interest rates and the dollar,"
Working Paper, Norges Bank
2008/12, Norges Bank.
- Kasa, Kenneth, 1992. "Common stochastic trends in international stock markets," Journal of Monetary Economics, Elsevier, Elsevier, vol. 29(1), pages 95-124, February.
- Felix Müsgens, 2006. "QUANTIFYING MARKET POWER IN THE GERMAN WHOLESALE ELECTRICITY MARKET USING A DYNAMIC MULTI-REGIONAL DISPATCH MODEL -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 471-498, December.
- Gert Brunekreeft and Sven Twelemann, 2005. "Regulation, Competition and Investment in the German Electricity Market: RegTP or REGTP," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 99-126.
- HobÃ¦k Haff, Ingrid & Lindqvist, Ola & LÃ¸land, Anders, 2008. "Risk premium in the UK natural gas forward market," Energy Economics, Elsevier, Elsevier, vol. 30(5), pages 2420-2440, September.
- Bunn, Derek W. & Gianfreda, Angelica, 2010. "Integration and shock transmissions across European electricity forward markets," Energy Economics, Elsevier, Elsevier, vol. 32(2), pages 278-291, March.
- Fridolfsson, Sven-Olof & Tangerås, Thomas P., 2009. "Market power in the Nordic electricity wholesale market: A survey of the empirical evidence," Energy Policy, Elsevier, vol. 37(9), pages 3681-3692, September.
- Micola, Augusto Ruperez & Bunn, Derek W., 2007. "Two markets and a weak link," Energy Economics, Elsevier, Elsevier, vol. 29(1), pages 79-93, January.
- Brunekreeft, G. & Twelemann, S., 2005. "Regulation, Competition and Investment in the German Electricity Market: RegTP or REGTP," Cambridge Working Papers in Economics 0501, Faculty of Economics, University of Cambridge.
- Park, Haesun & Mjelde, James W. & Bessler, David A., 2008. "Price interactions and discovery among natural gas spot markets in North America," Energy Policy, Elsevier, vol. 36(1), pages 290-302, January.
- Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, Elsevier, vol. 30(4), pages 1659-1671, July.
- LindstrÃ¶m, Erik & Regland, Fredrik, 2012. "Modeling extreme dependence between European electricity markets," Energy Economics, Elsevier, Elsevier, vol. 34(4), pages 899-904.
- Thoenes, Stefan, 2011. "Understanding the Determinants of Electricity Prices and the Impact of the German Nuclear Moratorium in 2011," EWI Working Papers, Energiewirtschaftliches Institut an der Universitaet zu Koeln 2011-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
- He, Yongxiu & Wang, Bing & Wang, Jianhui & Xiong, Wei & Xia, Tian, 2013. "Correlation between Chinese and international energy prices based on a HP filter and time difference analysis," Energy Policy, Elsevier, vol. 62(C), pages 898-909.
- Ciarreta AntuÃ±ano, Aitor & ZÃ¡rraga Alonso, Ainhoa, 2012. "Analysis of volatility transmissions in integrated and interconnected markets: The case of the Iberian and French markets," BILTOKI, Universidad del PaÃs Vasco - Departamento de EconomÃa Aplicada III (EconometrÃa y EstadÃstica) Biltoki;2012-04, Universidad del PaÃs Vasco - Departamento de EconomÃa Aplicada III (EconometrÃa y EstadÃstica).
- Moutinho, Victor & Vieira, Joel & Carrizo Moreira, António, 2011. "The crucial relationship among energy commodity prices: Evidence from the Spanish electricity market," Energy Policy, Elsevier, vol. 39(10), pages 5898-5908, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.