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Long-run relations in european electricity prices

Author

Listed:
  • Bruno Bosco

    (Department of Legal and Economic Systems, Università degli Studi di Milano-Bicocca, Milan, Italy)

  • Lucia Parisio

    (Department of Legal and Economic Systems, Università degli Studi di Milano-Bicocca, Milan, Italy)

  • Matteo Pelagatti

    (Department of Statistics, Università degli Studi di Milano-Bicocca, Milan, Italy)

  • Fabio Baldi

Abstract

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of a robust multivariate long-run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of a common long-term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across Europe and by the same marginal generation technology. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we also develop a battery of robust inference procedures that should assure the reliability of our results. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Bruno Bosco & Lucia Parisio & Matteo Pelagatti & Fabio Baldi, 2010. "Long-run relations in european electricity prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 805-832.
    • Handle: RePEc:jae:japmet:v:25:y:2010:i:5:p:805-832
    DOI: 10.1002/jae.1095
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    References listed on IDEAS

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