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Electricity Price Bubbles and Global Crisis: Does Financial Development Make a Difference?

Author

Listed:
  • Nicoleta Mihaela Doran
  • Alina Georgiana Manta
  • Roxana Maria Bădîrcea
  • Dorel Berceanu
  • Anca Băndoi
  • Gabriela Badareu

Abstract

The aim of this study is to investigate the existence of electricity price bubbles and identify the factors that contribute to their formation by conducting a comparative analysis between a developed country, Germany, and an emerging country, Romania. We employ the generalized sup ADF test, utilizing bi-annual data spanning from 2007 to 2022. Our findings reveal the presence of 2 distinct electricity price bubbles in both Germany and Romania. In Germany, the first bubble emerged in the second half of 2008, coinciding with the onset of the global economic crisis. Conversely, Romania did not experience a bubble as a result of the economic crisis during this period. The second electricity price bubble in both countries was primarily driven by Russia’s decision to halt gas supplies to Europe. Additionally, the surge in energy consumption following the economic recovery from the COVID-19 pandemic played a significant role. This research contributes to the broader discourse on energy economics by elucidating the mechanisms behind electricity price fluctuations in different economic contexts. The comparative approach underscores the importance of tailored policy responses that consider country-specific factors while addressing global challenges. As energy markets continue to evolve, such studies will be instrumental in guiding strategic decisions and fostering sustainable economic growth. JEL Classification : Q41, E31

Suggested Citation

  • Nicoleta Mihaela Doran & Alina Georgiana Manta & Roxana Maria Bădîrcea & Dorel Berceanu & Anca Băndoi & Gabriela Badareu, 2025. "Electricity Price Bubbles and Global Crisis: Does Financial Development Make a Difference?," The Energy Journal, , vol. 46(1), pages 179-202, January.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:1:p:179-202
    DOI: 10.1177/01956574241291834
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    1. Cincinelli, Peter & Pellini, Elisabetta, 2025. "The role of geopolitical and climate risk in driving uncertainty in European electricity markets," Energy Economics, Elsevier, vol. 144(C).

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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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