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Convergence of European Spot Market Prices for Natural Gas? A Real-Time Analysis of Market Integration using the Kalman Filter

Anne Neumann and Boriss Siliverstovs

No 05/05, Dresden Discussion Paper Series in Economics from Technische Universität Dresden, Faculty of Business and Economics, Department of Economics

Abstract: This paper provides a textbook example of integration between commodity markets, and the subsequent price convergence or absence thereof. We analyze price relations between spot markets for natural gas in Europe. We apply time-varying coefficient estimation applying the Kalman filter, to test whether price convergence between different locations is really taking place. Our results reveal that the construction of a pipeline between the UK and Zeebrugge (Belgium) has led to almost perfect price convergence between these locations; on the other hand, liberalization on the continent does not seem to be working yet.

Keywords: integration; convergence; econometrics; natural gas (search for similar items in EconPapers)
JEL-codes: C32 D43 L95 Q49 (search for similar items in EconPapers)
Date: 2005
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Journal Article: Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman Filter (2006) Downloads
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