two part models are robust to endogenous selection abstract this note shows that the two part model tpm can be used to estimate conditional and population averaged effects of exogenous covariates when there is endogenous selection between the two parts much like estimating an average treatment effect on the treated the tpm estimator only needs estimates of parameters that are recoverable from the observable data to estimate covariate effects the tpm estimator is consistent for the counter factual of interest when selection between the parts is endogenous because the unobservable parameter is multiplied by zero

the impact of wind power generation on the electricity price in germany abstract this paper investigates the relationship between intermittent wind power generation and electricity price behaviour in germany using a garch model i evaluate the effect of wind electricity generation on the level and the volatility of the electricity price in an integrated approach the results show that variable wind power reduces the price level but increases its volatility this paper s results also indicate that regulatory change has stabilised the wholesale price the electricity price volatility has decreased in germany after a modification of the marketing mechanism of renewable electricity this gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system

structural breaks dynamic correlations asymmetric volatility transmission and hedging strategies for petroleum prices and usd exchange rate abstract this paper investigates the influence of structural changes on the asymmetry of volatility spillovers asset allocation and portfolio diversification between the usd euro exchange market and each of six major spot petroleum markets including wti europe brent kerosene gasoline and propane using the bivariate dcc egarch model with and without structural change dummies the results provide evidence of significant asymmetric volatility spillovers between the u s dollar exchange rate and the petroleum markets moreover the model with the structural breaks reduces the degree of volatility persistence and leads to more appropriate hedging and asset allocation strategies for all pairs considered thus the findings have important implications for financial risk management

do informal risk sharing networks crowd out public voluntary health insurance evidence from vietnam many governments in low income countries have promoted voluntary health insurance schemes in recent years with the principal aim of improving access to services amongst those working in the informal economy few attempts to understand demand for such schemes exist particularly in light of the importance of informal social security arrangements for many households a model of demand for health insurance is developed reflecting this context and estimated using data from vietnam the results show that informal financial networks may crowd out government promoted health insurance implications for theory and policy are discussed

modelling asymmetric volatility in oil prices under structural breaks abstract this paper shows that accounting for endogenously determined structural breaks within an asymmetric garch model reduces volatility persistence in oil prices more importantly we find that both good and bad news have significantly more impact on volatility if structural breaks are accounted for in a model thus previous studies have significantly underestimated the impact of news on volatility as they have inadvertently ignored these structural breaks in volatility our empirical results suggest that it is best to include both asymmetric effects and structural breaks in a garch model to accurately estimate oil price volatility dynamics our results have important practical implications not only for option valuation and hedging decisions but also have major consequences for broader financial markets the energy industry and the overall economy

optimism and pessimism with expected utility savage 1954 provided a set of axioms on preferences over acts that were equivalent to the existence of an expected utility representation we show that in addition to this representation there is a continuum of other expected utility representations in which for any act the probability distribution over states depends on the corresponding outcomes we suggest that optimism and pessimism can be captured by the stake dependent probabilities in these alternative representations e g for a pessimist the probability of every outcome except the worst is distorted down from the savage probability extending the dm s preferences to be de ned on both subjective acts and objective lotteries we show how one may distinguish optimists from pessimists and separate attitude towards uncertainty from curvature of the utility function over monetary prizes

electricity prices large scale renewable integration and policy implications abstract this paper investigates the effects of intermittent solar and wind power generation on electricity price formation in germany we use daily data from 2010 to 2015 a period with profound modifications in the german electricity market the most notable being the rapid integration of photovoltaic and wind power sources as well as the phasing out of nuclear energy in the context of a garch in mean model we show that both solar and wind power granger cause electricity prices that solar power generation reduces the volatility of electricity prices by scaling down the use of peak load power plants and that wind power generation increases the volatility of electricity prices by challenging electricity market flexibility

do sunspots matter when agents are choquet expected utility maximizers we consider a two period complete market economy in which agents preferences are represented by a non additive expected utility if agents are optimistic i e if the measure according to which they compute their expected utility is subadditive sunspots matter at equilibrium if agents are pessimistic i e if their measure is convex and share the same beliefs sunspots do not matter at equilibrium and the normalized equilibrium price is indeterminate in this latter case one can even allow for different beliefs among agents and still have that sunspots do not matter the analysis is contrasted with the case of additive beliefs studied by cass and shell journal of political economy 91 1983 pp 193 227

drivers of electricity price dynamics comparative analysis of spot and futures markets abstract against the backdrop of numerous evidence that variable renewable generation decreases electricity prices and increases price volatility this paper assesses the drivers of electricity prices in spot and futures markets focusing on the german electricity markets we take into account nonlinearities in electricity prices by means of structural breaks and threshold regressions we find that short run and medium long run price drivers differ and more importantly that they vary over time in the case of the spot market the determinants of prices are renewable infeed and electricity demand while in the futures market the main drivers are natural gas coal and carbon prices our results give relevant insights for market participants who seek to optimize procurement selling strategies in the spot market and use the futures market to hedge against spot price volatility which has increased due to a higher renewable generation

characterizing optimism and pessimism directly through comonotonicity pessimism independence is introduced to characterize pessimistic risk attitudes for the nonlinear probability models of schmeidler quiggin and yaari directly in terms of comonotonicity rather than through additional conditions such as convexity of preferences pessimism independence requires the mixture of an arbitrary good and a fixed act to be preferred to the mixture of a comonotonic bad act and the fixed act thus more general than full force independence it does not exclude the additional pessimistic appreciation of the hedging involved in the mixture of a noncomonotonic bad and fixed act more restrictive than comonotonic independence it does exclude optimistic aversion of hedging

much ado about two reconsidering retransformation and the two part model in health econometrics in health economics applications involving outcomes y and covariates x it is often the case that the central inferential problems of interest involve e y x and its associated partial effects or elasticities many such outcomes have two fundamental statistical properties y 0 and the outcome y 0 is observed with sufficient frequency that the zeros cannot be ignored econometrically this paper 1 describes circumstances where the standard two part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters and 2 demonstrates some alternative approaches that are likely to prove helpful in applications

forecasting the conditional volatility of oil spot and futures prices with structural breaks and long memory models this paper extends previous studies by investigating the relevance of structural breaks and long memory in modeling and forecasting the conditional volatility of oil spot and futures prices using a variety of garch type models our results can be summarized as follows first we provide evidence of parameter instability in five out of nine garch based conditional volatility processes for energy prices second long memory is effectively present in all the series considered and a figarch model seems to better fit the data but the degree of volatility persistence diminishes significantly after adjusting for structural breaks finally the out of sample analysis shows that volatility models accommodating instability and long memory characteristics of the data provide the best volatility forecasts for most cases

consumer electricity and gas prices across australian capital cities structural breaks effects of policy reforms and interstate differences abstract we detect and analyze the most significant structural changes in the quarterly growth rate of consumer electricity and gas prices in australia and estimate their corresponding seasonal effects to do so we apply the general modelling framework of the bai perron breaking regression to all available quarterly data for capital cities individually and australia as a whole 1989q3 2017q2 retail energy prices in most australian states were deregulated in the 2000s we find that increases in average quarterly growth rates of electricity and gas prices consistently occurred in the third september quarter and find very few instances of increases in any other quarters of the year in the post deregulation period price increases are significantly higher than in the pre deregulation era results for some capital cities are stark in perth third quarter growth in electricity prices has been five times higher after the structural break in australia as a whole third quarter growth in gas prices has been three times higher after the structural break we discuss several possible explanations for energy price rises in the period since deregulation

is renewable energy a cost effective mitigation resource an application to the spanish electricity market abstract this paper evaluates the net effect of renewable energy policy in spain from 2002 to 2017 and calculates its cost effectiveness in terms of co2 emission reductions in the production of electricity our conclusions indicate that although the phasing out of feed in tariffs reduced the regulatory costs it also limited renewable participation in the electricity market leading to an increased electricity price and higher emissions according to our results the joint effect of i the value of avoided emissions due to renewable energy participation and ii the merit order effect was able to compensate for the regulatory costs subsidies up until 2010 while the sign of the net effect was reversed from 2011 to 2017 finally we find that the economic implications of emission reductions are highly dependent on how the social cost of carbon is measured

optimal regulation of renewable energy a comparison of feed in tariffs and tradable green certificates in the spanish electricity system abstract incentives for renewable energy based on feed in tariffs have succeeded in achieving high levels of renewable installed capacity however these incentives have not been responsive to market conditions or price signals imposing in some cases a great financial burden on consumers when renewable energy sources reached significant levels a way out of this problem could be a market mechanism where incentives respond to the level of investment on renewables we explore this issue comparing a regulatory system based on tradable green certificates able to react to market changes to a feed in tariffs incentive scheme we model the strategic interaction between participants in the electricity pool and the tradable green certificates market and focus on the optimal regulation for the retailer segment which generates the desired demand for green certificates as a decreasing function of the certificate price we then calibrate our theoretical model with data from the spanish electricity system for the period 2008 2013 simulations show that a green certificate scheme could both achieve the 2020 targets for renewable electricity and reduce regulatory costs however the role of regulators is still important since setting the right target for renewable electricity affects the cost burden of the system

ordinary least squares and sample selection models of health care demand monte carlo comparison this article examines alternative econometric models for health care demand estimation the analysis compares the rand health insurance study two part model with sample selection model estimators in a monte carlo simulation experiment designed to approximate individual level health care demand conditions the underlying variable distributions are taken from cross sectional data for a swiss 1981 population survey three sets of error distribution assumptions are examined bivariate normal normal logistic and cauchy despite theoretical concerns with the two part model it outperforms the sample selection model in terms of mean squared error of parameter estimate

the demand for preventive medical care the idea that people invest in health capital is an essential part of models of the demand for health but the investment motives behind health decision are often obscured by other factors this empirical paper investigates the demand for adult preventive medical care where the investment motives are relatively clear cut several important results demonstrate the usefulness of the approach first the analysis finds that annual use of two preventive services decreases with age although not the only plausible explanation the results are consistent with individuals shortens over the lifecycle second schooling is found to be an important determinant of demand with the more educated much more likely to use the services neither lifecycle nor schooling effects are consistently found in studies of the demand for culture care finally the empirical analysis also provides additional evidence on the responsiveness of the demand for preventive care to change in insurance coverage an important issue for heal

the econometrics of piecewise linear budget constraints a survey and exposition of the maximum likelihood method in this article maximum likelihood techniques for estimating consumer demand functions when budget constraints are piecewise linear are exposited and surveyed consumer demand functions are formally derived under such constraints and it is shown that the functions are themselves nonlinear as a result the econometric problems in estimating such functions are exposited and the importance of the stochastic specification is stressed in particular the specification of both unobserved heterogeneity of preferences and measurement error econometric issues in estimation and testing are discussed and the results of the studies that have been conducted to date are surveyed

driving for fun comparing the effect of fuel prices on weekday and weekend fuel consumption abstract focusing on individual motorists in car owning households in germany this paper investigates the determinants of automobile travel with the specific aim of quantifying the effects of fuel prices and person level attributes on travel conducted over a five day week and weekend our analysis is predicated on the notion that car use is an individual decision albeit one that is dependent on intra household allocation processes thereby building on a growing body of literature that has identified the importance of socioeconomic factors such as employment status gender and the presence of children in determining both access to and use of the car to capture this two stage decision process we employ the two part model which consists of probit and ols estimators and derive elasticity estimates that incorporate both the discrete and continuous choices pertaining to car use with fuel price elasticity estimates ranging between 0 45 and 0 50 our results suggest raising prices via fuel taxes to be a promising energy conservation and climate protection measure

how does germany s green energy policy affect electricity market volatility an application of conditional autoregressive range models abstract based on a dynamic model for the high low range of electricity prices this article analyses the effects of germany s green energy policy on the volatility of the electricity market using european energy exchange data from 2000 to 2015 we find rather high volatility in the years 2000 2009 but also that the weekly price range has significantly declined in the period following the year 2009 this period is characterised by active regulation under the energy industry law enwg the eu emissions trading directive etd and the renewable energy law eeg in contrast to the preceding period price jumps are smaller and less frequent especially for day time hours implying that current policy measures are effective in promoting renewable energies while simultaneously upholding electricity market stability this is because the regulations strive towards a more and more flexible and market oriented structure which allows better integration of renewable energies and supports an efficient alignment of renewable electricity supply with demand

how do opec news and structural breaks impact returns and volatility in crude oil markets further evidence from a long memory process abstract since its formation opec through its conference decisions has been a major player in the world oil markets the purpose of this paper is to examine the impacts of opec s different news announcements on the conditional expectations and volatility of crude oil markets in the presence of long memory and structural changes to do so we first discern opec s oil production behavior in response to its cut maintain and increase decisions then by applying the arma garch class models to the two global benchmarks wti and brent over the period may 1987 through december 2012 we find strong evidence of long memory the empirical evidence also shows that opec s announcements especially the cut and the maintain decisions have a significant effect on both returns and volatility of the crude oil markets particularly that of the wti moreover we explore the possibility of structural breaks in the crude oil prices and detect five six breakpoints for the wti brent oil markets the presence of structural breaks reduces the persistence of volatility accounting for opec s scheduled news announcements in the presence of structural changes reduces the degree of volatility persistence and enhances the understanding of this volatility in the oil markets these results have several implications for policy makers oil traders and other participants in the crude oil markets

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

is monthly us natural gas consumption stationary new evidence from a garch unit root test with structural breaks we apply a recently developed unit root test that simultaneously accounts for heteroskedasticity and structural breaks to united states monthly natural gas consumption we find that united states monthly natural gas consumption is stationary our results illustrate the importance of accounting for heteroskedasticity when testing for a unit root in energy consumption with higher frequency data

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

has renewable energy induced competitive behavior in the spanish electricity market abstract recent energy policy has favored a massive introduction of renewable energy sources on electricity markets which has greatly impacted their performance first the electricity price has decreased as a consequence of the so called merit order effect another relevant effect is associated to the intermittent nature of renewable energy which has increased the cost of ancillary services a third and important aspect less addressed in the literature is the induced change in the strategic behavior of the conventional electricity producers in principle the entry of new generators in a concentrated market would make it more competitive and change the strategic behavior of the incumbents we test this hypothesis for the spanish wholesale market while we find no significant change in behavior for nuclear hydropower and coal a change is observed in combined cycle bidding strategies after the entry of renewable generators our analysis shows that the massive entry of renewable energy sources made other generators behavior more competitive in the short run but the effect was not persistent

modeling realized volatility on the spanish intra day electricity market abstract this paper models the realized volatility of the hourly prices from the six sessions of the spanish intra day electricity market for the period 2002 2014 based on the sequential organization of the market a model in which realized volatility depends on its own past and that of the other sessions is specified and then modified in two ways on the one hand total variation is decomposed into jump and non jump components and on the other hand egarch innovations are considered estimation results show significant volatility transmissions between the sessions out of sample forecast criteria select egarch innovations for sessions 1 and 2 while simpler models with no egarch innovations and no jump distinction are preferred for sessions 5 and 6 we argue how results are driven by the market structure the market design and the regulation of renewable generation

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

the effect of environmental uncertainty on the tragedy of the commons abstract we model a common pool resource game under environmental uncertainty where individuals in a symmetric group face the dilemma of sharing a common resource each player chooses a consumption level and obtains a corresponding share of that resource but if total consumption exceeds a sustainable level then the resource deteriorates and all players are worse off we consider the effect of uncertainty about the sustainable resource size on the outcome of this game assuming a general dynamic for resource deterioration we study the effect of increased ambiguity i e uncertain probabilities pertaining to the common resource s sustainable size we show that whereas increased risk may lead to more selfish behavior i e to more consumption increased ambiguity may have the opposite effect

risk aversion in the theory of expected utility with rank dependent probabilities expected utility with rank dependent probability theory is a model of decision making under risk where the preference relations on the set of probability distributions is represented by the mathematical expectation of a utility function with respect to a transformation of the probability distributions on the set of outcomes this paper defines based on g teaux differentiability measures of risk aversion for such preferences which characterize the relation more risk averse and applies these measures to the analysis of unconditional and conditional portfolio choice problems

do high oil prices matter evidence on the mobility behavior of german households focusing on travel survey data from germany this paper investigates the determinants of automobile travel with the specific aim of quantifying the effects of fuel prices and fuel economy the analysis is predicated on the notion that car mileage is a two stage decision process comprising the discrete choice of whether to own a car and the continuous choice of distance traveled to capture this process we employ censored regression models consisting of probit and ols estimators which allows us to gauge the extent to which sample selectivity may bias the results our elasticity estimates indicate a significant positive association between increased fuel economy and increased driving and a significantly negative fuel price elasticity which ranges between 35 and 41 taken together these results suggest that fuel taxes are likely to be a more effective policy measure in reducing emissions than fuel efficiency standards

price and volatility dynamics between electricity and fuel costs some evidence for spain abstract the purpose of this study is to investigate the causal linkages between the spanish electricity brent crude oil and zeebrugge belgium natural gas 1 month ahead forward prices following lutkepohl et al 2004 we control for the presence of a structural change in the series and then we use the johansen cointegration test and a vector error correction model vecm to embrace the analysis additionally a multivariate generalized autoregressive conditional heteroskedastic garch model is applied to explore volatility interactions between the three markets involved in the study our findings reveal that brent crude oil and zeebrugge natural gas forward prices play a prominent role in the spanish electricity price formation process furthermore causation both in price and volatility runs from brent crude oil and natural gas forward markets to the spanish electricity forward market these results are of practical importance for both the wholesale and retail markets participants as well as the regulator through the established link between the forward contracts price and the spanish tariff of last resort paid by more than 23 million of customers

estimates of the demand for medical care under different functional forms we estimate price and income elasticities from a linear log linear and the almost ideal demand model with and without an adjustment for selectivity bias in an effort to show that special attention should be paid to the underlying assumptions of consumer behaviour when estimating a medical care demand model the literature on medical care utilization is extended by incorporating two major components of spending as separate demands in a system of medical care spending we find that estimates of elasticities vary depending on the functional form of the estimating equation thus questioning the usefulness for policy purposes of single estimates of elasticities

does renewable energy generation decrease the volatility of electricity prices an analysis of denmark and germany although variable renewable energy vre technologies with zero marginal costs decrease electricity prices the literature is inconclusive about how the resulting shift in the supply curves impacts price volatility because the flexibility to respond to high peak and low off peak prices is crucial for demand response applications and may compensate for the losses of conventional generators caused by lower average prices there is a need to understand how the penetration of vre affects volatility in this paper we build distributed lag models with danish and german data to estimate the impact of vre generation on electricity price volatility we find that in denmark wind power decreases the daily volatility of prices by flattening the hourly price profile but in germany it increases the volatility because it has a stronger impact on off peak prices our analysis suggests that access to flexible generation capacity and wind power generation patterns contribute to these differing impacts meanwhile solar power decreases price volatility in germany by contrast the weekly volatility of prices increases in both areas due to the intermittency of vre thus policy measures for facilitating the integration of vre should be tailored to such region specific patterns

a causal interpretation of extensive and intensive margin effects in generalized tobit models the usual decomposition of effects in corner solution models into extensive and intensive margins is generally incompatible with a causal interpretation this paper proposes a decomposition based on the joint distribution of potential outcomes which is meaningful in a causal sense the difference between decompositions can be substantial and yield diametrically opposed results as shown in a standard tobit model example in a generalized tobit application exploring the effect of reducing firm entry regulation on bilateral trade flows between countries estimates suggest that using the usual decomposition would overstate the contribution of the extensive margin by around 15

the role of regulatory uncertainty in certificate markets a case study of the swedish norwegian market abstract price volatility in green certificate markets reflects uncertainty over future prices representing a major source of risk for renewable energy generators price risk is considered the principal deficiency of this market based policy since it causes investors to require higher returns moreover investors are exposed to regulatory risk namely the risk that a change in the regulation will materially impact the certificate price regulatory uncertainty is reflected in market volatility exacerbating certificate price risk using an econometric approach we investigate the role of regulatory changes on price volatility in the swedish certificate market the results of our analysis indicate that regulatory changes strongly affect certificate markets resulting in periods of higher volatility moreover we analyze whether certificate price volatility has changed after creating a joint swedish norwegian market results indicate that the ambivalence surrounding the creation of this bigger market led to a period of increased price volatility between 2010 and 2011 overall this article brings a better understanding of the role of regulatory uncertainty on certificate markets and gives evidence for its negative impact in terms of increased price volatility

let them eat cake a note on comparing alternative models of the demand for medical care this article comments on the rand econometric approach to estimating and testing models of the demand for medical care as typified in duan et al 1983 the rand methodology is contrasted with more mainstream econometric approaches to similar empirical problems as developed in the sample selection literature it is shown that despite rand s claim their approach requires some fairly unusual assumptions on the model joint error distribution and functional form alternatively their model likelihood functions may be interpreted as being nested in more general sample selection model likelihood functions with easily testable parameter restrictions

decision theory under ambiguity we review recent advances in the field of decision making under uncertainty or ambiguity we start with a presentation of the general approach to a decision problem under uncertainty as well as the standard bayesian treatment and issues with this treatment we present more general approaches choquet expected utility maximin expected utility smooth ambiguity and so forth that have been developed in the literature under the name of models of ambiguity sensitive preferences we draw a distinction between fully subjective models and models incorporating explicitly some information we review definitions and characterizations of ambiguity aversion in these models we mention the challenges posed by some of the models presented we end with a review of part of the experimental literature and applications of these models to economic settings

is green energy expensive empirical evidence from the spanish electricity market abstract renewable energy promotion and its cost are at the heart of the energy policy debate in many countries the question from an economic perspective is how expensive the promotion of renewable sources through price based incentive schemes is this paper addresses this issue empirically we analyze the spanish electricity market during the period 2008 2012 where renewable energy production rose by 57 to determine how expensive it was we first measure the savings due to the spot price reduction driven by the merit order effect and second we compute the amount paid as incentives to green energy by the electricity system the difference between the two is the net cost of green energy to the electricity markets we present aggregate results for renewable sources as a whole as well as individual results for each technology we show that at the initial stages when renewable capacity was low green energy promotion paid for itself 2008 2009 however from 2010 on when renewable production reached a relatively high level it started to impose a positive net cost on the system finally we found substantial differences among technologies wind energy implied the lowest net cost while solar photovoltaic was the most expensive

the computation of opportunity costs in polychotomous choice models with selectivity this article provides general formulas for the computation of opportunity costs or foregone earnings of chosen alternatives in sample selection models with polychotomous choices with observed choice probabilities and outcomes of alternatives chosen by some individuals the opportunity costs for individuals who do not choose those alternatives can be evaluated for the probability indexed sample selection models with logit choice probabilities which include the polychotomous choice model of lung fei lee 1983 the formulas are simple and reveal restrictions implicitly imposed on those models these formulas can be useful for empirical studies copyright 1995 by mit press

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

renewable energy regulation and structural breaks an empirical analysis of spanish electricity price volatility abstract international experience proves that electricity prices have undergone major changes in volatility since the entry of green technologies the intermittency of renewable sources is one of the reasons for these changes as it leads to higher volatility in periods of higher participation by renewables we argue that the development of the regulatory system promoting renewable electricity also plays a crucial role we raise a question that deserves attention could an incentive scheme induce higher share of renewables and lower volatility simultaneously in this paper we conduct an empirical analysis with spanish data we analyze possible ensuing structural changes in spanish electricity spot price volatility from january 2002 to december 2017 we identify two structural breaks linked to important measures related to renewable electricity i the abolishment of the feed in tariff scheme and ii the establishment of a more market oriented regulation based on investment and operating costs we conclude that stable regulatory policies reduce volatility even though the presence of renewable sources is greater furthermore market based policy measures achieve lower volatility encouraging good integration of intermittent renewable electricity

the heckman correction for sample selection and its critique this paper gives a short overview of monte carlo studies on the usefulness of heckman s 1976 1979 two step estimator for estimating selection models such models occur frequently in empirical work especially in microeconometrics when estimating wage equations or consumer expenditures it is shown that exploratory work to check for collinearity problems is strongly recommended before deciding on which estimator to apply in the absence of collinearity problems the full information maximum likelihood estimator is preferable to the limited information two step method of heckman although the latter also gives reasonable results if however collinearity problems prevail subsample ols or the two part model is the most robust amongst the simple to calculate estimators

effects of renewables on the stylized facts of electricity prices abstract many countries around the world have increased their renewable installed capacity due to a greater awareness of climate concerns under this new framework with renewables being among the main generation sources the literature warns of a dramatic change in price behaviour some of the most commonly claimed effects of having a significant proportion of renewable generating sources in the total electricity production mix include i a systematic decrease in overall wholesale market prices ii a higher occurrence of price jumps and iii a significant increase in price volatility the goal of the present study is to test whether these changes in price behaviour have actually come about to do so we focus on the spanish day ahead electricity market as a paradigmatic example in line with the literature it is found a statistically negative relationship between the renewable generation share and the day ahead market marginal prices as well we have obtained statistical confirmation of the fact that renewables generation share volatility is transferred to price volatility though similarly to other generation technologies finally in contrast to the general belief that the introduction of renewable generation would give rise to extreme positive prices according to our results increases in renewables generation share reduce the probability of upward jumps in prices the results obtained are of interest for portfolio managers practitioners and regulators

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

structural breaks and electricity prices further evidence on the role of climate policy uncertainties in the australian electricity market the primary objectives and the strategies of a national electricity market are the efficient delivery of network services and the electricity infrastructure to meet the long term consumer s interests therefore the objective of this study is to explore whether electricity prices across the six australian states display instability such instability is closely associated with the presence of structural breaks in relevance to policy events on australian carbon policies the study makes use of weekly australian wholesale electricity prices spanning the period from june 8th 2008 to march 30th 2014 along with linear and non linear unit root testing methodologies the results provide supportive evidence that the australian electricity market can be described as a less stable electricity market which implies that a high degree of market power is exercised by generators across regional markets these findings are expected to have substantial consequences for the effectiveness of carbon dioxide mitigating policies especially when there is uncertainty as to whether the planned environmental policy is put in place for the lifespan of undertaken investments