On the link between forward energy prices: A nonlinear panel cointegration approach
Marc Joëts and
Valérie Mignon ()
No 2011-25, EconomiX Working Papers from University of Paris Nanterre, EconomiX
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)
Pages: 16 pages
New Economics Papers: this item is included in nep-cwa and nep-ene
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Journal Article: On the link between forward energy prices: A nonlinear panel cointegration approach (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2011-25
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