A Robust Multivariate Long Run Analysis of European Electricity Prices
This paper analyses the interdependencies existing in wholesale European electricity prices. The results of a multivariate long run dynamic analysis of weekly median prices reveal the presence of a strong although not perfect integration among some neighboring markets considered in the sample and the existence of common long-term dynamics of electricity prices and gas prices but not oil prices. The existence of long-term dynamics among gas prices and electricity prices may prove to be important for long-term hedging operations to be conducted even in markets where there are no electricity derivatives.
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