Price convergence and information efficiency in German natural gas markets
AbstractIn 2007, Germany changed network access regulation in the natural gas sector and introduced a so-called entry-exit system. The re-regulation’s spot market effects remain to be examined. We use cointegration analysis and a state space model with time-varying coefficients to study the development of natural gas spot prices in the two major trading hubs in Germany and the interlinked Dutch spot market. To analyse information efficiency in more detail, the state space model is extended to an error correction model. Overall, our results suggest a reasonable degree of price convergence between the corresponding hubs. However, allowing for time-variant adjustment processes, the remaining price differentials are only partly explained by transportation costs, indicating capacity constraints. Nonetheless, market efficiency in terms of information processing has increased considerably among Germany and The Netherlands.
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Bibliographic InfoPaper provided by Energiewirtschaftliches Institut an der Universitaet zu Koeln in its series EWI Working Papers with number 2012-5.
Length: 22 pages
Date of creation: 19 Mar 2012
Date of revision:
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natural gas market; regulation; cointegration; price convergence; time-varying coefficient;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-ENE-2012-03-28 (Energy Economics)
- NEP-REG-2012-03-28 (Regulation)
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