Transmission of prices and price volatility in Australian electricity spot markets: A multivariate GARCH analysis
AbstractThis paper examines the transmission of spot electricity prices and price volatility among the five Australian electricity markets in the National Electricity Market (NEM): namely, New South Wales (NSW), Queensland (QLD), South Australia (SA), the Snowy Mountains Hydroelectric Scheme (SNO) and Victoria (VIC). A multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model is used to identify the source and magnitude of spillovers. The results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets. This appears to be directly related to the limitations of the present system of regional interconnectors. Nevertheless, the large number of significant ownvolatility and cross-volatility spillovers in all five markets indicates the presence of strong ARCH and GARCH effects. Contrary to evidence from studies in North American electricity markets, the results also indicate that Australian electricity spot prices are stationary.
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Bibliographic InfoPaper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 114.
Date of creation: 20 Jul 2002
Date of revision:
spot electricity price markets; mean and volatility spillovers; multivariate GARCH;
Other versions of this item:
- Worthington, Andrew & Kay-Spratley, Adam & Higgs, Helen, 2005. "Transmission of prices and price volatility in Australian electricity spot markets: a multivariate GARCH analysis," Energy Economics, Elsevier, vol. 27(2), pages 337-350, March.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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