Multinational Electricity Market Integration and Electricity Price Dynamics
The paper empirically explores the electricity price dynamics in the Nordic electricity market, Nord Pool. In particular, the focus is on determining what effect the multinational market integration, during the years 1996-2006, has had on the conditional mean electricity price, its volatility, the price jump-intensity and the price jump size. Empirically the study reveals that the conditional mean electricity price increased when Finland joined the Nord Pool exchange, and the price remained at the higher level when Denmark also joined. Turning to the price volatility, this increased when Finland joined, mainly due to an increase in jump size, and decreased when Denmark also joined Nord Pool. However, the price jump-intensity decreased both when Finland and Denmark joined the market. This means that a large electricity market integration in Scandinavia seems to reduce the probability of sudden price jumps. That is, the multinational electricity market integration in Scandinavia seems to have created a market that handles external shocks to supply and demand better than the separate national electricity markets previous did.
|Date of creation:||15 Apr 2008|
|Date of revision:|
|Publication status:||Published as Lundgren, Jens, Jörgen Hellström and Niklas Rudholm, 'Multinational Electricity Market Integration and Electricity Price Dynamics' in Proceedings of the EEM 2008 - 5th International Conference on the European Electricity Market, 2008.|
|Contact details of provider:|| Postal: |
Phone: +46 (0)8 762 72 80
Fax: +46 (0)8 679 76 06
Web page: http://www.hui.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fred G M C Nieuwland & Willem F C Verschoor & Christian C P Wolff, 1990. "EMS Exchange Rates," CEPR Financial Markets Paper 0002, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- Chan, Wing H & Maheu, John M, 2002. "Conditional Jump Dynamics in Stock Market Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 377-89, July.
- Hjalmarsson, Erik, 2000. "Nord Pool: A Power Market Without Market Power," Working Papers in Economics 28, University of Gothenburg, Department of Economics.
- Bystrom, Hans N. E., 2005.
"Extreme value theory and extremely large electricity price changes,"
International Review of Economics & Finance,
Elsevier, vol. 14(1), pages 41-55.
- Byström, Hans, 2001. "Extreme Value Theory and Extremely Large Electricity Price Changes," Working Papers 2001:19, Lund University, Department of Economics.
- Amundsen, E.S. & Bergman, L. & Andersson, B., 1998. "Competition and Prices on the Emerging Nordic Electricity Market," Norway; Department of Economics, University of Bergen 0298, Department of Economics, University of Bergen.
- Guthrie, Graeme & Videbeck, Steen, 2007. "Electricity spot price dynamics: Beyond financial models," Energy Policy, Elsevier, vol. 35(11), pages 5614-5621, November.
- Geert Bekaert & Stephen F. Gray, 1996.
"Target Zones and Exchange Rates: An Empirical Investigation,"
NBER Working Papers
5445, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Gray, Stephen F., 1998. "Target zones and exchange rates:: An empirical investigation," Journal of International Economics, Elsevier, vol. 45(1), pages 1-35, June.
- Peter Fortune, 1999. "Are stock returns different over weekends? a jump diffusion analysis of the "weekend effect"," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-19.
- Mikael Bask & Jens Lundgren & Niklas Rudholm, 2009. "Market power in the expanding Nordic power market," Applied Economics, Taylor & Francis Journals, vol. 43(9), pages 1035-1043.
- Christopher J. Neely, 1998.
"Target zones and conditional volatility: the role of realignments,"
1994-008, Federal Reserve Bank of St. Louis.
- Neely, Christopher J., 1999. "Target zones and conditional volatility: The role of realignments," Journal of Empirical Finance, Elsevier, vol. 6(2), pages 177-192, April.
- Huisman, R. & Mahieu, R.J., 2001.
"Regime Jumps in Electricity Prices,"
ERIM Report Series Research in Management
ERS-2001-48-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
- Amundsen, Eirik S. & Bergman, Lars, 2006. "Why has the Nordic electricity market worked so well?," Utilities Policy, Elsevier, vol. 14(3), pages 148-157, September.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Sanjiv R. Das, 1998. "Poisson-Guassian Processes and the Bond Markets," NBER Working Papers 6631, National Bureau of Economic Research, Inc.
- Amundsen, Eirik S. & Bergman, Lars & Andersson, Bo, 1998. "Competition and Prices on the Emerging Nordic Electricity Market," SSE/EFI Working Paper Series in Economics and Finance 217, Stockholm School of Economics.
- Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
- Girod, Jacques & Bourbonnais, Régis & Keppler, Jan Horst, 2007. "The Econometrics of Energy Systems," Economics Papers from University Paris Dauphine 123456789/120, Paris Dauphine University.
When requesting a correction, please mention this item's handle: RePEc:hhs:huiwps:0016. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Nilsson)
If references are entirely missing, you can add them using this form.