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Detection of Multiple Bubbles in South African Electricity Prices

Author

Listed:
  • Rangan Gupta

    (Department of Economics, University of Pretoria and IPAG Business School)

  • Roula Inglesi-Lotz

    (Department of Economics, University of Pretoria)

Abstract

This paper investigates the existence and dating of electricity price bubbles in South Africa from 1965 to 2013. In the literature, it is agreed that such a task is difficult due to the explosive nature of price bubbles and labeling their presence’s occurrence. To overcome the predicament, we follow the methodological approach suggested by Phillips et al. (2013): a recursive right-tailed Generalized Sup Augmented Dickey-Fuller (GSADF). Two significant bubbles were detected in the output-adjusted nominal prices: the one was a long one from 1971 to 1998 and can be attributed to the monopolistic unregulated nature of the electricity market at the time; while the second one lasted for a shorted period of time (2008-2009) coinciding with the severe supply crisis of 2008, and the massive price hikes that followed it.

Suggested Citation

  • Rangan Gupta & Roula Inglesi-Lotz, 2015. "Detection of Multiple Bubbles in South African Electricity Prices," Working Papers 201546, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201546
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    More about this item

    Keywords

    Bubbles; electricity prices; South Africa; GSADF;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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