Volatility spillovers and carbon price in the Nordic wholesale electricity markets

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dc.citation.volume134
dc.contributor.authorLyu C
dc.contributor.authorDo HX
dc.contributor.authorNepal R
dc.contributor.authorJamasb T
dc.date.accessioned2024-07-10T20:50:40Z
dc.date.available2024-07-10T20:50:40Z
dc.date.issued2024-06
dc.description.abstractThis paper investigates price volatility and spillovers in the Nordic electricity wholesale markets. We use the Time-Varying Parameter Vector Autoregressive (TVP-VAR), Rolling Window-based VAR (RW-VAR), and high dimensional VAR with common factors (VAR-CF) methods and analyze the integration dynamics among these markets and impact of carbon prices on volatility spillovers. We use 107,352 hourly price data from January 2010 to March 2022. The novelty of this research is four-fold. First, we adopt a connectedness approach to explore volatility interactions among the four Nordic markets, contributing to the scarce literature on volatility in this market. Second, we segment the Norwegian market into southern and northern regions, revealing differences in volatility spillover patterns. Third, we investigate the effect of carbon prices on volatility spillovers and market dynamics. Last, we show significant contribution of covariances to interdependence among markets. We find significant connectedness between the Nordic markets, with an average Total Connectedness Index of between 50% (with a system of variance) and 90% (with a system of both variance and covariance). Sweden is the sole net volatility spillover transmitter, while Denmark experiences the largest shocks from the system. We further find that carbon prices exert a 5% significant impact on the volatility spillover index.
dc.description.confidentialfalse
dc.edition.editionJune 2024
dc.identifier.citationLyu C, Do HX, Nepal R, Jamasb T. (2024). Volatility spillovers and carbon price in the Nordic wholesale electricity markets. Energy Economics. 134.
dc.identifier.doi10.1016/j.eneco.2024.107559
dc.identifier.eissn1873-6181
dc.identifier.elements-typejournal-article
dc.identifier.issn0140-9883
dc.identifier.number107559
dc.identifier.piiS0140988324002676
dc.identifier.urihttps://mro.massey.ac.nz/handle/10179/70145
dc.languageEnglish
dc.publisherElsevier B V
dc.publisher.urihttps://www.sciencedirect.com/science/article/pii/S0140988324002676
dc.relation.isPartOfEnergy Economics
dc.rights(c) 2024 The Author/s
dc.rightsCC BY 4.0
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.subjectElectricity markets
dc.subjectPrice volatility
dc.subjectNord pool
dc.subjectCarbon market
dc.subjectRenewable energy
dc.titleVolatility spillovers and carbon price in the Nordic wholesale electricity markets
dc.typeJournal article
pubs.elements-id488607
pubs.organisational-groupOther
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