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On the link between forward energy prices: A nonlinear panel cointegration approach

Marc Joëts and Valérie Mignon ()

Energy Economics, 2012, vol. 34, issue 4, 1170-1175

Abstract: This paper investigates the relationship between forward prices of oil, gas, coal, and electricity using a nonlinear panel cointegration framework. To this end, we consider a panel of 35 maturities and control for the economic and financial environment using equity futures prices. Estimating the cointegrating relationship, we find that oil, gas and coal forward prices are positively linked, while the negative link between oil and electricity prices is consistent with a substitution effect between the two energy sources on the long run. Estimating panel smooth transition regression (PSTR) models, we show that the forward oil price adjustment process toward its equilibrium value is nonlinear and asymmetric, putting forward the key role played by self-sustaining dynamics and speculation phenomena.

Keywords: Forward energy prices; Speculation; Panel cointegration; Nonlinear model; PSTR (search for similar items in EconPapers)
JEL-codes: C33 Q40 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:4:p:1170-1175

DOI: 10.1016/j.eneco.2011.10.019

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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