Dynamic volatility connectedness in the European electricity market

Magdalena Sikorska-Pastuszka and Monika Papież

Energy Economics, 2023, vol. 127, issue PA

Abstract: Since the 1990s, one of the energy policy objectives of the European Union (EU) has been to create a single, integrated European electricity market. This study uses a broad set of European electricity markets to answer the question whether volatility connectedness is higher in geographically closer markets or whether all markets are integrated. This question is particularly relevant now, at a time of high volatility of energy commodity prices, which can affect energy security in Europe. Our empirical analysis examines volatility connectedness in 26 European electricity markets between 1 August 2007 and 23 February 2022 using the time-varying parameter vector autoregressive model (TVP-VAR) based on the extended joint connectedness method (Balcilar et al., 2021). Furthermore, the impact of volatility of determinants of electricity prices on volatility connectedness in European electricity markets since 2016 is assessed.

Keywords: European electricity market; Market integration; Volatility connectedness; Spillovers; Energy policy (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:127:y:2023:i:pa:s0140988323005431

DOI: 10.1016/j.eneco.2023.107045

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