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Price Convergence and Information Efficiency in German Natural Gas Markets

Author

Listed:
  • Growitsch Christian

    (Institute of Energy Economics University of Cologne,Köln, Germany)

  • Nepal Rabindra

    (University of Queensland,Brisbane, Australia)

  • Stronzik Marcus

    (Scientific Institute for Infrastructure and Communication Services (WIK), Rhöndorfer Str. 68 53604Bad Honnef, Germany)

Abstract

In 2007, Germany changed network access regulation in the natural gas sector and introduced a so-called entry-exit system. The spot market effects of the reregulation 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 spot market in the Netherlands. 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. Market efficiency in terms of information processing has increased considerably among Germany and the Netherlands.

Suggested Citation

  • Growitsch Christian & Nepal Rabindra & Stronzik Marcus, 2015. "Price Convergence and Information Efficiency in German Natural Gas Markets," German Economic Review, De Gruyter, vol. 16(1), pages 87-103, February.
    • Handle: RePEc:bpj:germec:v:16:y:2015:i:1:p:87-103
    DOI: 10.1111/geer.12034
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    More about this item

    Keywords

    Natural gas market; regulation; cointegration; price convergence; time-varying coefficient;
    All these keywords.

    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; State Space Models
    • 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

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