forecasting hourly electricity prices using armax garch models an application to miso hubs abstract the recent deregulation of the electricity industry and reliance on competitive wholesale markets has generated significant volatility in wholesale electricity prices given the importance of short term price forecasts in this new environment this paper estimates and evaluates the forecasting performance of four armax garch models for five miso pricing hubs cinergy first energy illinois michigan and minnesota using hourly data from june 1 2006 to october 6 2007 our empirical results reveal three important patterns a electricity price volatility is regional and the optimum volatility model depends in part on the hub location the forecast horizon and regulated versus unregulated status of the market b the aparch model performs well in hubs in deregulated states and c volatility dynamics in regulated states are better captured by a simple garch model and thus are less complex

a spot forward model for electricity prices with regime shifts 2014 elsevier b v all rights reserved this is the authors manuscript preprint to the article

electricity demand analysis using cointegration and arima modelling a case study of turkey in the early 2000s the republic of turkey has initiated an ambitious reform program in her electricity market which requires privatization liberalization as well as a radical restructuring the most controversial reason behind or justification for recent reforms has been the rapid electricity demand growth that is to say the whole reform process has been a part of the endeavors to avoid the so called energy crisis using cointegration analysis and autoregressive integrated moving average arima modelling the present article focuses on this issue by both providing an electricity demand estimation and forecast and comparing the results with official projections the study concludes first that consumers respond to price and income changes is quite limited and therefore there is a need for economic regulation in turkish electricity market and second that the current official electricity demand projections highly overestimate the electricity demand which may endanger the development of both a coherent energy policy in general and a healthy electricity market in particular

heterogeneous price dynamics in u s regional electricity markets abstract the u s electricity wholesale market is organized in several deregulated regional markets this paper compares price dynamics of electricity in the u s wholesale markets and shows that electricity prices from the west and east coasts have different regime dynamics our methodology suggests that electricity prices are better parameterized by four regimes with different levels of volatility additionally west and east coast markets differ in the time spent in each regime the extremely high volatility regime describes west coast prices during the california electricity crisis but east coast prices are also frequent in that regime we find evidence of synchronization of price dynamics in the mean reverting and highest volatility regimes i e prices from the east and west coasts tend to be in the same regimes at the same time

a cross country analysis of electricity market reforms potential contribution of new institutional economics abstract the paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others we analyze this question by using an empirical econometric model based on poisson regression with cross section data covering 51 states in the us 13 provinces in canada and 51 other countries in the course of the study we check the validity of three important arguments of new institutional economics nie for the power market liberalization process the first argument is the path dependency to test its impact on the reform progress we try to explain whether the background of the chairperson of the regulatory agency when reforms started or that of the governor minister responsible for energy policy at that time has an impact on the subsequent reform progress the second argument is the impact of democracy as an institution on the reform progress we look at the effect of two important indicators of democracy i e civil liberties and political rights on the reform progress the final argument of nie is about transaction costs we concentrate on the level of corruption in a country as one of the key factors that determine transaction costs and try to explore its impact on the reforms the results show that the backgrounds of the chairperson and the minister governor the level of democracy and corruption in a country are significantly correlated with how far reforms have gone in that country the negative relationship between reform progress and civil liberties may indicate that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as harmful to their self interest

royalty reform and illegal reporting of harvest volumes under alternative penalty schemes we study royalty reform in a timber concessions framework illegal logging in the form of underreporting of harvesting is modeled harvesters can be either risk neutral or risk averse detection of illegal logging by the government is imperfect and costly we focus on the government s policy problem solving first for socially optimal royalty and auditing levels and then examining a revenue neutral reform toward this benchmark we find that higher royalty progression will always decrease actual harvest volume regardless of risk preferences for the harvester but the effect of a reform on reported harvest volume is sensitive to the penalty scheme imposed by the government if the fine is levied on evaded royalty payments then higher royalty progression may increase reported harvest volume but when the fine is levied on undeclared harvest volume the reverse happens higher royalty regression increases actual harvest volume under both penalty schemes but it may decrease reported harvest volume higher regression will increase undeclared harvest volume when the fine is levied on evaded royalty payments

a note on progression penalty schemes and tax evasion abstract this note deals with the question of whether shifting the tax base towards more progression will stimulate or discourage tax evasion when the tax base is shifted so that either the expected tax revenues of government or the expected utility of taxpayer will remain unchanged the answer turns out to depend sensitively on the nature of penalty schemes if caught in tax evasion if the penalty rate is charged on the undeclared income tax evasion will increase while if the penalty rate is charged on the evaded tax tax evasion will decrease when the tax base is shifted towards progression

efficient modeling and forecasting of electricity spot prices abstract the increasing importance of renewable energy especially solar and wind power has led to new forces in the formation of electricity prices hence this paper introduces an econometric model for the hourly time series of electricity prices of the european power exchange epex which incorporates specific features like renewable energy the model consists of several sophisticated and established approaches and can be regarded as a periodic var tarch with wind power solar power and load as influences on the time series it is able to map the distinct and well known features of electricity prices in germany an efficient iteratively reweighted lasso approach is used for the estimation moreover it is shown that several existing models are outperformed by the procedure developed in this paper

energy markets volatility modelling using garch abstract this paper investigates the empirical properties of oil natural gas and electricity price volatilities using a range of univariate and multivariate garch models and daily data from wholesale markets in the united states for the period from 2001 to 2013 the key contribution to the literature is the estimation of trivariate bekk and dcc models that allow us to observe spillovers and interactions among energy markets we evaluate and compare the performance of univariate and multivariate models with a range of diagnostic and forecast performance tests and assess forecasting performance and conditional correlation dynamics

the impact of power market reforms on electricity price cost margins and cross subsidy levels a cross country panel data analysis abstract one of the main expectations from power market reform has been a reduction in both price cost margins and cross subsidy levels between industrial and residential consumers this paper focuses on this issue by looking at the impact of the electricity industry reforms on residential and industrial electricity price cost margins and their effect on cross subsidy levels between consumer groups using panel data for 63 developed and developing countries covering the period 1982 2009 empirical models are developed and analyzed the research findings suggest that there is no uniform pattern for the impact of reform process as a whole on price cost margins and cross subsidy levels each individual reform step has different impact on price cost margins and cross subsidy levels for each consumer and country group our findings imply that reform steps have different impacts in different countries which supports the idea reform prescription for a specific country cannot easily and successfully be transferred to another one so transferring the formal and economic structure of a successful power market in a developed country to developing countries is not a sufficient condition for good economic performance of the electricity industries in developing countries furthermore the study suggests that power consumption income level and country specific features constitute other important determinants of electricity price cost margins and cross subsidy levels

asymmetric volatility in european day ahead power markets a comparative microeconomic analysis this paper uses high frequency spot price data from fourteen wholesale electricity markets in europe to analyze asymmetric volatility in european day ahead power markets with exponential garch e garch and tarch models our data set ranges from 1992 to 2015 and consists of approximately 926 000 observations as such this paper constitutes the most extensive and comprehensive work conducted so far on european power markets to the best of our knowledge unlike most of the literature that treats price as a continuous variable and attempts to model its trajectory this paper adopts a unique approach and regards each hour in a day a separate market the results show in post 2008 period the most expensive electricity is consumed in turkey ireland and uk while the cheapest power is in russia nordic countries and czech republic russia poland and czech republic have the least volatile markets while france ireland and portugal have the most volatile ones volatility has decreased in many european countries in post 2008 period besides we find magnitude effect is usually larger than the leverage effect meaning that the absolute value of price change is relatively more important than the sign of the change whether it is an increase or a decrease to explain volatility in european day ahead power markets moreover the results imply there is not a uniform inverse leverage effect in electricity prices that is price increases are more destabilizing in some european markets e g poland slovenia ireland netherlands than comparable price decreases but vice versa also holds true in some other countries e g portugal and france leverage or inverse leverage effect in post 2008 period is relatively stronger in portugal france and ireland but its impact is quite limited in turkey and germany furthermore although the impact of seasonality on prices is obvious a specific pattern cannot be identified finally large changes in the volatility will affect future volatilities for a relatively longer period of time in nordic countries ireland and the uk while changes in current volatility will have less effect on future volatilities in czech republic russia and turkey

why do electricity prices jump empirical evidence from the nordic electricity market the paper empirically explores the possible causes behind electricity price jumps in the nordic electricity market nord pool a time series model a mixed garch earji jump model capturing the com

modelling price and volatility inter relationships in the australian wholesale spot electricity markets this paper examines the inter relationships of wholesale spot electricity prices among the four regional electricity markets in the australian national electricity market nem namely new south wales queensland south australia and victoria using the constant conditional correlation and tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 and engle s engle r 2002 dynamic conditional correlation a sample class of multivariate generalized autoregressive conditional heteroskedasticity models journal of business and economic statistics 20 3 339 350 dynamic conditional correlation multivariate garch models tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 dynamic conditional correlation multivariate garch model which takes account of the student t specification produces the best results at the univariate garch 1 1 level the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets in the dynamic conditional correlation equation the highest conditional correlations are evident between the well connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well interconnected markets

on indirect tax evasion abstract this paper examines some aspects of the decision to evade indirect taxes in the context of a monopolistic firm in particular the degree of interdependence between the tax shifting and the tax evasion decisions is analyzed both in the case of a fixed and of a variable probability of being detected it is shown that in the first case the shifting and evasion decisions are separable while in the second case this is no longer true in this latter case a rule according to which the probability decreases with larger declarations can be said to be an efficient one the conditions for a firm s becoming a completely submerged one are derived and finally direct and indirect tax evasion are compared it is shown that for decreasing risk aversion an indirect tax is evaded as a percentage less than a profit tax of equal yield

short term forecasting of electricity prices for miso hubs evidence from arima egarch models this study estimates three time series models arima arima egarch and arima egarch m for hourly real time electricity prices for each of the five hubs of the midwest independent system operator miso and examines the in and out of sample forecasting performance of the respective models the results from the arima models reveal the presence of autoregressive conditional heteroskedasticity recognizing the possibility of asymmetric time varying volatility the egarch specification for the variance equation demonstrates the presence of an inverse leverage effect in electricity prices for each hub with respect to forecasts no one model clearly dominates the others in terms of in sample forecasting performance based on four forecast evaluation statistics however the arima egarch m model outperforms the other models michigan hub is the exception in terms of the out of sample forecasting performance

human capital accumulation and labor market equilibrium the objective of this paper is to analyse an equilibrium search model with on the job search and human capital accumulation in our model wages are disperse because firms pay workers of the same productivity different wages and workers of different productivies earn different wages new entrants to the labour market increase their wages mainly through on the job search as workers gain more experience and move up the offer distribution job to job transitions become less frequent and human capital accumulation dominates wage growth this interaction generates a wage distribution that exhibits a density with a unique mode and a long and decreasing right tail as observed in the data

forecasting energy market volatility using garch models can multivariate models beat univariate models abstract in this paper we forecast energy market volatility using both univariate and multivariate garch class models first we forecast volatilities of individual assets and find that multivariate models display better performance than univariate models second we forecast crack spread volatility and contrast the performance of multivariate models for two underlyings with the alternative of univariate ones for crack spreads directly our evidence shows that univariate models allowing for asymmetric effects display the greatest accuracy we also discuss the hedging strategy based on multivariate models and its implications for market participants

royalty systems government revenues and forest condition an application from malaysia royalty structure has been linked to deforestation through non sustainable harvesting and high grading yet royalties are an important rent generation mechanism for governments in this paper a dynamic model of government policy choice is used to compare different royalty systems with respect to government revenue generation and high grading empirical analyses of the various royalty systems is then undertaken for forest concessions in malaysia one unique aspect of our study is an examination of how different royalty systems impact harvesting of highand low valued timber species government rent capture and concessionaire profits the results should help with future royalty design

a long term short term model for daily electricity prices with dynamic volatility abstract in this paper we introduce a new stochastic long term short term model for short term electricity prices and apply it to four major european indices namely to the german dutch uk and nordic one we give evidence that all time series contain certain periodic mostly annual patterns and show how to use the wavelet transform a tool of multiresolution analysis for filtering purpose the wavelet transform is also applied to separate the long term trend from the short term oscillation in the seasonal adjusted log prices in all time series we find evidence for dynamic volatility which we incorporate by using a bivariate garch model with constant correlation eventually we fit various models from the existing literature to the data and come to the conclusion that our approach performs best for the error distribution the normal inverse gaussian distribution shows the best fit

applying arma garch approaches to forecasting short term electricity prices abstract accurately modeling and predicting the mean and volatility of electricity prices can be of great importance to value electricity bid or hedge against the volatility of electricity prices and manage risk the paper applies various autoregressive moving average arma models with generalized autoregressive conditional heteroskedasticity garch processes namely arma garch models along with their modified forms arma garch in mean arma garch m to model and forecast hourly ahead electricity prices in total 10 different model structures are adopted and this paper thus conducts a comprehensive investigation on the arma garch based time series forecasting of electricity prices multiple statistical measures are employed to evaluate the modeling sufficiency and predication accuracy of the arma garch m methods the results show that the arma garch m models are in general an effective tool for modeling and forecasting the mean and volatility of electricity prices while arma sgarch m models are simple and robust and the arma gjrgarch m model is very competitive in addition we observe that hourly electricity prices exhibit apparent daily weekly and monthly periodicities and have the nonlinear and asymmetric time varying volatility together with an inverse leverage effect