Detection of Multiple Bubbles in South African Electricity Prices

Rangan Gupta and Roula Inglesi-Lotz

No 201546, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates the existence and dating of electricity price bubbles in South Africa from 1965 to 2013. In the literature, it is agreed that such a task is difficult due to the explosive nature of price bubbles and labeling their presence’s occurrence. To overcome the predicament, we follow the methodological approach suggested by Phillips et al. (2013): a recursive right-tailed Generalized Sup Augmented Dickey-Fuller (GSADF). Two significant bubbles were detected in the output-adjusted nominal prices: the one was a long one from 1971 to 1998 and can be attributed to the monopolistic unregulated nature of the electricity market at the time; while the second one lasted for a shorted period of time (2008-2009) coinciding with the severe supply crisis of 2008, and the massive price hikes that followed it.

Keywords: Bubbles; electricity prices; South Africa; GSADF (search for similar items in EconPapers)
JEL-codes: C15 Q41 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2015-06
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201546

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