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A robust multivariate long run analysis of European electricity prices

Bruno Bosco, Lucia Parisio (), Matteo Pelagatti () and Fabio Baldi

No 20070901, Working Papers from Università degli Studi di Milano-Bicocca, Dipartimento di Statistica

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.

Keywords: European electricity prices; Cointegration; Interdependencies; Equilibrium Correction model; Oil prices; Robustness (search for similar items in EconPapers)
JEL-codes: C15 C32 D44 L94 Q40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-ene
Date: 2007-09
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Working Paper: A Robust Multivariate Long Run Analysis of European Electricity Prices (2007) Downloads
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Persistent link: http://EconPapers.repec.org/RePEc:mis:wpaper:20070901

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