Why do electricity prices jump? Empirical evidence from the Nordic electricity market
AbstractThe paper empirically explores the possible causes behind electricity price jumps in the Nordic electricity market, Nord Pool. A time-series model (a mixed GARCH–EARJI jump model) capturing the common statistical features of electricity prices is used to identify price jumps. By the model, a categorical variable is defined distinguishing no, positive and negative jumps. The causes for the jumps are then explored through the use of ordered probit models in a second stage. The empirical results indicate that the structure of the market plays an important role in whether shocks in the demand and supply for electricity translate into price jumps.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 34 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/eneco
Electricity price; Price jumps;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
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