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A robust multivariate long run analysis of European electricity prices

Author

Listed:
  • Bruno Bosco
  • Lucia Parisio
  • Matteo Pelagatti
  • Fabio Baldi

Abstract

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of our 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 long term dynamics among electricity prices and between electricity prices and gas prices may prove to be important for long term hedging operations to be conducted even in countries where well established and liquid electricity derivatives markets are not present. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we adapt and further develop a battery of robust inference procedures that should assure the reliability of our results.

Suggested Citation

  • Bruno Bosco & Lucia Parisio & Matteo Pelagatti & Fabio Baldi, 2007. "A robust multivariate long run analysis of European electricity prices," Working Papers 20070901, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
  • Handle: RePEc:mis:wpaper:20070901
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    File URL: http://www.statistica.unimib.it/utenti/WorkingPapers/WorkingPapers/20070901.pdf
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Le Pen, Yannick & Sévi, Benoît, 2010. "Volatility transmission and volatility impulse response functions in European electricity forward markets," Energy Economics, Elsevier, vol. 32(4), pages 758-770, July.
    2. Marossy, Zita, 2011. "A villamos energia áralakulásának egy új modellje
      [A new model for price movement in electric power]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 253-274.
    3. Espasa, Antoni & Carlomagno, Guillermo, 2014. "The pairwise approach to model a large set of disaggregates with common trends," DES - Working Papers. Statistics and Econometrics. WS ws141309, Universidad Carlos III de Madrid. Departamento de Estadística.
    4. Bollino, Carlo Andrea & Ciferri, Davide & Polinori, Paolo, 2013. "Integration and Convergence in European Electricity Markets," MPRA Paper 44704, University Library of Munich, Germany.
    5. Elbert Dijkgraaf & Maarten C.W. Janssen, 2009. "Defining European Wholesale Electricity Markets: An “And/Or” Approach," Tinbergen Institute Discussion Papers 09-079/3, Tinbergen Institute.
    6. Lilian de Menezes & Melanie A. Houllier, 2013. "Modelling Germany´s Energy Transition and its Potential Effect on European Electricity Spot Markets," EcoMod2013 5395, EcoMod.
    7. repec:dau:papers:123456789/5450 is not listed on IDEAS

    More about this item

    Keywords

    European electricity prices; Cointegration; Interdependencies; Equilibrium Correction model; Oil prices; Robustness;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • 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
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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