The extent of European power markets
This paper analyzes the convergence process of Central-West European wholesale electricity markets from 2004 to the beginning of 2011. Jevon's law of price indifference is scrutinized using price correlation, parametric and nonparametric tests of price-differences and cointegration analysis. As a unique identifaction strategy national bank holidays are used as exogenous system shocks to trace the degree of market integration before the advent of the so-called market coupling of European power markets. In order to avoid overestimation of the degree of market integration, we specifically control for seasonal effects and common input factors. While the overall degree of integration between Germany and its neighbours has increased in the course of time, results suggest that only Austria and Germany already constitute a joint price area and that market coupling increases the convergence of markets at least between its participants.
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"Convergence of European Spot Market Prices for Natural Gas? A Real-Time Analysis of Market Integration using the Kalman Filter,"
Dresden Discussion Paper Series in Economics
05/05, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
- Anne Neumann & Boriss Siliverstovs & Christian von Hirschhausen, 2006. "Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman Filter," Applied Economics Letters, Taylor & Francis Journals, vol. 13(11), pages 727-732.
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- John Baffes, 1991. "Some Further Evidence on the Law of One Price: The Law of One Price Still Holds," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1264-1273.
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