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Modeling electricity prices: international evidence

Alvaro Escribano (), Juan Ignacio Peña and Pablo Villaplana Conde

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper analyses the evolution of electricity prices in deregulated markets. We present a general model that simultaneously takes into account the possibility of several factors: seasonality, mean reversion, GARCH behaviour and time-dependent jumps. The model is applied to equilibrium spot prices of electricity markets from Argentina, Australia (Victoria), New Zealand (Hayward), NordPool (Scandinavia), Spain and U.S. (PJM) using daily data. Six different nested models were estimated to compare the relative importance of each factor and their interactions. We obtained that electricity prices are mean-reverting with strong volatility (GARCH) and jumps of time-dependent intensity even after adjusting for seasonality. We also provide a detailed unit root analysis of electricity prices against mean reversion, in the presence of jumps and GARCH errors, and propose a new powerful procedure based on bootstrap techniques.

Date: 2002-06
New Economics Papers: this item is included in nep-com and nep-ene
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Journal Article: Modelling Electricity Prices: International Evidence (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we022708

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