the dark side of the sun how solar power production affects the market value of solar and gas sources abstract using daily data for the italian wholesale day ahead power market over the period 2008 2013 we assess the impact of solar production on the market value of solar and gas sources defined using the concepts of value factor and unit revenues we find that on average solar generation negatively affects the solar source market value causing a departure from the grid parity condition and mining their competitiveness once public incentives are removed this negative relation is not constant over time and becomes stronger for increasing solar penetration in the energy mix interestingly the opposite is found when looking at gas while the relation between solar production and the gas market value is negative or not significant when the former is low it turns positive for higher levels of solar production this is the result of a change in gas producers bidding strategies indeed in the italian power market the highest hourly price has shifted from the peak daytime when solar production is concentrated to the off peak nighttime when solar is absent from the market and gas can exploit temporary market power

market specific news and its impact on forward premia on electricity markets abstract this paper studies the impact of market specific news on the short term forward premia on the nordic electricity market i show that the short term premia between the day ahead and intra day electricity prices on the nordic market can be partly explained by the arrival of news specific to the power market by exploring the types of news i show that production failures are most important in shaping premia production disruptions in coal powered units are most frequent and have the greatest effect on the differences between the day ahead and intra day prices

rules and discretion with noncoordinated monetary and fiscal policies the time inconsistency of optimal monetary policy is due to the effects of tax distortions thus the issue of how to improve upon the time consistent suboptimal monetary policy is related to that of the coordination of monetary and fiscal policy we present a model with three players the central bark the fiscal authority and wage setters in which distortionary taxes are explicitly modelled we show that binding commitments to monetary rules are not necessarily welfare improving if monetary and fiscal policy are not coordinated we also examine the effects of different degrees of independence of the central bank

how is demand for natural gas determined across european industrial sectors abstract this paper estimates the response of manufacturing sectors natural gas demand to price and output changes the average response to future changes in absolute and relative prices of the manufacturing industry in an oecd country depends on the mix of manufacturing industries particularly with respect to energy intensity and substitution opportunities in production we estimate short and long run demand elasticities using a shrinkage estimator which allows heterogeneous demand responses across industries for each country our results show that price and output elasticities are heterogeneous within the same manufacturing sector across countries furthermore an output contraction due to e g demand shocks will generally have larger negative effects on gas demand than increases in natural gas prices

monetary uncertainty strategic wage setting and equilibrium employment abstract an important recent strand of literature has shown that if wages are set strategically by inflation averse non atomistic unions then equilibrium employment is sensitive to the monetary regime this note demonstrates that such sensitivity need not reflect a direct aversion to inflation by unions but instead may result from union concerns for employment objectives in circumstances in which the variance and mean value of inflation are positively related

environmental regulation capital output and energy efficiency in china an empirical research based on integrated energy prices abstract how to improve environmental quality and achieve high quality development of economy have become important challenges for china in the new era based on the klems framework this paper analyzes the relationship between environmental regulation factor substitution and energy saving effect by using panel structure vector autoregression model and panel data of china industry from 2004 to 2014 the following conclusions are drawn 1 china s environmental regulation can promote the substitution of capital to energy however benefit of this substitution in the long run is greater than that in the short run 2 only in the long run can china s environmental regulations have significant energy saving effect technological innovation is the main reason for the improvement of energy saving effect of environmental regulation 3 china s environmental regulation will not significantly improve the structure of capital which makes the economic benefits low finally the paper discusses the possible ways to improve china s environmental regulation from the aspects of forming a scientific environmental supervision system improving energy pricing mechanism and capital structure

central bank independence and public debt policy the various proposals for the institutional design of the european monetary union have drawn fresh attention to the link between monetary and public debt policies this paper explores the strategic interaction between fiscal authorities setting public debt and the central bank controlling monetary policy in the absence of political distortions an optimally designed conservative independent central bank is sufficient to establish the second best in the presence of political distortions or with coordination of monetary and fiscal policy however also a debt target is needed

centralized wage setting and monetary policy in a reputational equilibrium this paper analyzes a repeated game between the central bank and a centralized trade union the central bank would be better off if it could commit to a noninflationary strategy when this commitment is not enforceable a noninflationary equilibrium can still be sustained by a reputational mechanism if the central bank has superior information about its own objective function the qualitative properties of this reputational equilibrium are shown to differ from the cases considered in the existing literature where the central bank was modeled as playing a game against competitive labor markets copyright 1988 by ohio state university press

union wage setting and exchange rate policy the performance of an optimally managed float is compared with that of a credibly fixed exchange rate in a small open economy framework where wages are set by a monopoly union two key results emerge first a sufficient condition for the managed float to outperform a fixed rate is that the union be no less inflation averse than society second introducing an inflation target into the central bank s loss function ensures the superiority of the managed float regardless of the weight attached to inflation by the union both results reflect the sensitivity of the union mark up to the policy regime

exchange rate policy wage formation and credibility abstract since the collapse of the bretton woods system some european countries have pursued discretionary exchange rate policies in order to maintain or enhance the international competitiveness of the traded goods sector these countries which typically feature centralized wage setting have also tended to experience high nominal wage increases the overall outcome may be described as a devaluation wage spiral this paper applies two models of repeated games to analyze the strategic interaction between an exchange rate setting policy maker and a wage setting trade union it is shown how a devaluation wage spiral may result from a conflict of interest over the real wage it is also shown how reputational forces may provide a way out of the devaluation wage spiral

environmental regulations and productivity growth the case of fossil fueled electric power generation this paper measures and analyzes the effect of sulfur dioxide emission restrictions on the rate of productivity growth in the electric power industry over the 1973 79 business cycle a firm specific measure of regulatory intensity is developed which depends on the severity of the emission standard the extent of enforcement and the unconstrained emission rate relevant to each utility the results indicate that emission regulations result in significantly higher generating costs primarily from the increased use of low sulfur fuels the average rate of productivity growth was reduced by 0 59 percentage points per year for constrained utilities

structural distortions and decentralized fiscal policies in emu the combination of discretionary monetary policy labor market distortions and nominal wage rigidity yields excessive inflation as monetary policy tries to exploit nominal wage contracts to address labor market distortions an inflation target reduces inflation but creates a conflict between monetary policy and discretionary fiscal policy if fiscal policy is set at a higher frequency than nominal wages are preventing the associated excessive accumulation of public debt calls for debt ceilings if countries differ substantially in terms of structural distortions uniform debt ceilings must be complemented by country specific debt targets in order to prevent decentralized fiscal authorities from employing debt policy strategically

some macro implications of risk using the capital asset pricing model as the financial sector of a conventional rational expectations macro model an increase in expected inflation reduces the long run capital stock contrary to the usual result this occurs because the induced fall in real balances increases equity s share in the market raises equity s beta and discount rate and reduces investment increases in the variance of disturbances to aggregate demand reduce the capital stock while increases in the variance of inflation raise the stock a proportionate increase in both variances reduces the captial stock copyright 1987 by ohio state university press

a dynamic putty semi putty model of aggregate energy demand energy conservation dominated the adjustments of the energy decade the present study develops further the aggregate analysis to revisit the question of energy flexibility within the context of a multi factor dynamic model the resulting model preserves various adding up constraints cross equation parameter restrictions and consistent indexes within an ad hoc stock adjustment dynamic process applications to data for the usa and japan confirm the estimates of large long run elasticities under the assumption of a slow adjustment process

crucial issues concerning central bank independence abstract this paper argues first that it is inappropriate to presume that central banks will in the absence of any tangible precommitment technology inevitably behave in a discretionary fashion that implies an inflationary bias furthermore there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it several implications are discussed

independent monetary policies and social equity monetary policy is formulated as a game between the government and the central bank we show that when fiscal policy has a redistributional component there is a conflict between optimally configured monetary policies and equality consequently inflation averse governments interested in social equity will need to limit their use of fiscal policy

the macroeconomics of social pacts in this paper we analyze macroeconomic interactions between trade unions the central bank and the fiscal policymaker we explicitly model unions concern for public expenditure paving the way for an analysis of the potential gains from cooperation between the fiscal policymaker and the unions i e the so called corporatist or social pacts that have characterized economic policies in a number of european countries in the last few decades we also highlight the profoundly different incentives generated by institutional arrangements such as the maastricht criteria and the stability and growth pact the former has unambiguously induced more efficient outcomes the latter is likely to backfire

insider power unemployment dynamics and multiple inflation equilibria this paper incorporates employment dynamics due to insider power into the barro gordon theory of inflation unlike in the static barro gordon case and even though our infinitehorizon model is linear quadratic there can be two markov perfect equilibria so that the same unemployment may correspond to either low or high inflation both equilibrium inflation rates measured per unit of the gap between the insiders and government s employment targets are higher than the corresponding rate in the static case the low inflation equilibrium has intuitive comparative statics properties in that inflation is increasing in insider power and the discount factor but the high inflation equilibrium behaves in the opposite way the highinflation equilibrium can be eliminated by a future precommitment to a fixed inflation regime e g erm but only if this precommitment can be made with certainty contrary to the static model inflation may be lower when the union puts a positive weight on a wage target than when it cares only about employment even when this wage target is consistent with a lower employment level than the employment target

forecasting day ahead electricity spot prices the impact of the exaa to other european electricity markets abstract in our paper we analyze the relationship between the day ahead electricity price of the energy exchange austria exaa and other day ahead electricity prices in europe we focus on markets which settle their prices after the exaa which enables traders to include the exaa price into their calculations for each market we employ econometric models to incorporate the exaa price and compare them with their counterparts without the price of the austrian exchange by employing a forecasting study we find that electricity price models can be improved when exaa prices are considered

energy price energy efficiency and capital productivity empirical investigations and policy implications abstract the immediate effect of carbon pricing policy is to raise energy costs which in turn reduces energy consumption either through induced capital under utilization or investments in new energy efficient capital the latter mechanism which implies improvements in energy efficiency is realized in the long run while the former which has implications for capital productivity tends to occur in the short run we employ panel vector autoregressions as well as co integration and error correction techniques to identify these short and long run relationships including their differences across canadian industries

the case of negative day ahead electricity prices in recent years germany has significantly increased its share of electricity produced from renewable sources which is mainly due to the renewable energy act eeg the eeg substantially impacts the dynamics of intra day electricity prices by increasing the likelihood of negative prices in this paper we present a non gaussian process to model german intra day electricity prices and propose an estimation procedure for this model most importantly our model is able to generate extreme positive and negative spikes a simulation study demonstrates the ability of our model to capture the characteristics of the data

loss of monetary discretion in a simple dynamic policy game abstract we analyze a simple policy game featuring monetary credibility problems and argue that loss of monetary discretion is not advantageous two elements form the basis of our analysis firstly we endogenize the source of credibility problems and secondly we consider a dynamic framework where credibility problems are not time invariant by doing this we are able to demonstrate that credibility problems are temporary and in steady state the government has removed these through sound policies a binding policy rule will only serve as an obstacle towards this steady state

short and long term equilibria relationships between first and third generation dynamic factor demand models abstract first generation dynamic models of input demands are theoretically inferior to third generation models yet their simplicity makes them attractive for estimation purposes moreover first generation models can be shown to be generically related to third generation models and under certain assumptions input demand expressions in a third generation model collapse to those of the first generation seemingly offering a short cut for estimation however empirical comparisons suggest that first generation specifications do not afford a reasonable approximation to input functions embedded in more complex third generation models furthermore the reduced form coefficients do not permit identification of third generation model structures

price elasticity of demand in the epex spot market for electricity new empirical evidence this paper provides estimates for the price elasticity of demand in the european power exchange epex day ahead market for electricity an institutional change in the year 2010 allows us to use wind speed as an instrumental variable for hourly spot market prices in order to deal with potential endogeneity problems the average price elasticity of demand covering the years 2010 2014 is about 0 43 and our results point to a decline in its absolute value over time

inflation targeting fiscal rules and the policy mix cross effects and interactions we examine how inflation targeting it and fiscal rules fr affect inflation and fiscal performance in a large panel of countries during 1990 2009 in line with theory both fr and it appear to shape monetary and fiscal outcomes significant cross effects seem to exist as it strengthens fiscal performance whereas the combination of fr and it tends to be associated with more disciplined macroeconomic policies than if only one of these institutions operates our findings suggest that it and fr affect the coordination of the policy mix and point to potential benefits of reforming macroeconomic frameworks in a holistic fashion

inflationary finance under discrepion and rules inflationary finance involves first the tax on cash balances from expected inflation and second a capital levy from unexpected inflation from the standpoint of minimizing distortions these capital levies are attractive ex post to the policymaker in a full equilibrium two conditions hold 1 the monetary authority optimizes subject to people s expectations mechanisms and 2 people form expectations rationally given their knowledge of the policymaker s objectives the outcomes under discretionary policy are contrasted with those generated under rules in a purely discretionary regime the monetary authority can make no meaningful commitments about the future behavior of money and prices under an enforced rule it becomes possible to make some guarantees hence the links between monetary actions and inflationary expectations can be internalized there is a distinction between fully contingent rules and rules of simple form a simple rule allows the internalization of some connections between policy act ion and inflationary expectations but discretion permits some desirable flexibility of monetary growth this abstract was borrowed from another version of this item

interactions of commitment and discretion in monetary and fiscal policies we consider monetary scal interactions when the monetary authority is more conservative than the scal with both policies discretionary 1 nash equilibrium yields lower output and higher price than the ideal points of both authorities 2 of the two leadership possibilities scal leadership is generally better with scal discretion monetary commitment yields the same outcome as discretionary monetary leadership for all realizations of shocks but scal commitment is not similarly negated by monetary discretion second best outcomes require either joint commitment or identical targets for both authorities output socially optimal and price level appropriately conservative or complete separation of tasks jel e61 e63

fiscal leadership and central bank design this article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives it is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously further it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies jel classification e52 e61 f42

debt inflation and central bank independence abstract increasing the independence of a central bank from political influence although ex ante socially beneficial and initially successful in reducing inflation would ultimately fail to lower inflation permanently the smaller anticipated policy distortions implemented by a more independent central bank would induce the fiscal authority to decrease current distortions by increasing the deficit over time inflation would increase to accommodate a higher public debt by contrast imposing a strict inflation target would lower inflation permanently and insulate the primary deficit from political distortions

discretion wage indexation and inflation it is now well understood that discretionary policy making frequently leads to socially sub optimal outcomes this point was first made by kydland and prescott 12 using an example of a monetary policy game they argued that in the presence of output distortions in the economy the monetary authority has an incentive to renege on earlier promises to maintain price stability by expanding the money supply in order to create unexpected inflation thereby increasing output and employment since private wage setters form expectations rationally this policy action is anticipated and in equilibrium leads to excessive inflation without any resulting change in output or employment consequently in the absence of enforceable policy rules the time consistent discretionary monetary path produces a socially sub optimal inflation rate this form of policy behavior has important implications for the decisions of private agents such as their choice of the degree of wage indexation however most work in the literature on endogenous wage indexation stemming from the seminal paper by gray 10 has analyzed the equilibrium indexation choice assuming either a constant money growth rule 1 or a monetary rule involving lagged or contemporaneous feedback 8 17 only the recent papers by devereux 5 6 have attempted to examine the implications of time consistent discretionary monetary policy for endogenous wage indexation the informational structure he considers has the monetary authority setting the money stock prior to the realization of shocks so that the authority has no information regarding current period disturbances when determining its course of action this assumption precludes any contemporaneous attempt by the monetary authority to stabilize output or the price level devereux reaches the conclusion that wage setters who are aware of the authority s policy decision will find it optimal to index positively to unanticipated price level surprises since none of the aggregate shocks are offset directly by the monetary authority thus the informational environment confronting the authority influences the degree of indexation and subsequently the manner in which aggregate demand and supply variability impinge upon social welfare

policy credibility and inflation in a wage setting game this paper combines the conventional monetary policy game with a wage setting game among several non cooperating wage setters each with some monopoly power the inflationary bias in market economies is explained in terms of the wage competition bias this bias does not disappear even when the central bank communicates its policy goals precisely and credibly in a policy game with several non cooperative monopolistic wage setters and a central bank if discretionary policy is interpreted as wage setters being stackelberg leaders relative to the central bank a discretionary policy leads to both higher inflation and lower output

interfuel substitution results from several sectors of the greek economy abstract the purpose of this paper is to study interfuel substitution in various sectors of the greek economy an econometric model utilizing the translog cost function is estimated for three major sectors of the economy agriculture industry disaggregated also into three branches and transport fuels are aggregated into three categories solid fuels liquid fuels and electricity the model is estimated using time series data over the period 1960 1980 the results indicate substitutability between liquid fuels and electricity mainly complementarity between liquid and solid fuels and substitutability between electricity and solid fuels

estimates of energy and non energy elasticities in selected asian manufacturing sectors policy implications abstract this paper presents the results of a study of the demand elasticities for energy and non energy inputs in the food processing and textile industries in bangladesh the philippines and thailand estimates of substitution elasticities in production were derived by fitting data to a translog cost function for the period 1970 1980 for bangladesh 1970 1978 for the philippines and 1974 1977 for thailand the results varied according to the industries studied and across countries they were compared with those of several developing and industrialized countries and substitutability among inputs was found to be greater in the manufacturing sector of the developing countries studies than in those of industrialized countries the generally high elasticities between labour and energy have implications for relative input pricing and use in developing countries

fiscal activism under inflation targeting and non atomistic wage setting this paper presents a game between a fiscal authority an independent central bank and non atomistic wage setters the effects of fiscal activism and inflation targeting on labour market outcomes are analysed the results suggest that inflation targeting provides incentive for wage restraint moreover real wages are increasing in the degree of fiscal activism as wage setters exploit the response of a fiscal authority seeking to promote employment numerical results suggest that the benefits of targeting inflation are larger when the government pursues an activist policy and therefore that there is some substitutability between fiscal and monetary rules

bashing and coercion in monetary policy bashing and coercion in monetary policy i introduction we ve got excess plant capacity i don t think that growth is excessive i have not been overly concerned with inflation president bush in a february 14 1989 interview with the wall street journal p a8 with the economy running close to potential the risks seem to be on the side of a further strengthening of price pressure chairman greenspan in testimony before congress on february 21 1989 reprinted from the wall street journal february 22 1989 p a2 many investors appeared to be confused by conflicting statements by bush greenspan and other u s officials wall street journal february 22 1989 p a1 if the fed pushes interest rates significantly higher bush may go public with critism wall street journal march 24 1989 p a1 recent research in macroeconomic policy games by rogoff 1985 alesina 1988 tabellini 1987 and waller 1989a has concentrated on the importance of an independent central bank in a discretionary policymaking environment in the original work on policy games by barro and gordon 1983a 1983b no distinction was made between the monetary authority and the fiscal authority but these researchers argue that because the fiscal authority may have incentives to create excessive inflation giving the powers of money creation to an independent monetary authority whose inflation preferences differ from the current fiscal authority may enable society to reduce the equilibrium inflation rate this results holds even though monetary policy is still chosen in a discretionary fashion therefore backus and driffill 1985a 537 conclude autonomous central banks thus act as a precommitment device which may help to make noninflationary policies more credible and less costly implicit in the term independent is the belief that the central bank is free to choose monetary policy without interference from the fiscal authority administration however this is not generally the case the appointment of central bankers by the legislative or executive branch of the government governmental oversight of policy decisions or political pressure on the central bank by these branches will tend to influence the setting of monetary policy and subsequently the extent to which the central bank is truly independent 1 kane 1984 argues that even if it is not able to directly choose monetary policy the current administration still may be able to achieve its preferred monetary growth path by putting pressure on the monetary authority to do its bidding restricting the powers of the central bank public criticism of central bank performance here after referred to as bashing 2 exclusion from fiscal policy planning which hurts the egos of central bankers or undertaking actions which damage the post central bank income or opportunities of the central bankers are ways he suggests in which the administration can coerce cooperation from the central bank in creating excessive money growth such arguments have given rise to the view that the administration is engaged in a reputation building game with the central bank although the central bank has control of the money supply the administration can threaten to impose a welfare loss by bashing the central bank if it does not generate the monetary policy preferred by the administration the success of this strategy depends on the size of the bashing costs imposed on the central bank and also on the extent to which these threats are credible credibility in turn depends on the benefits and costs incurred by the administration in carrying out its threats as a result the administration may choose to bash the central bank if it does not produce the administration s preferred money inflation outcome by establishing a reputation for bashing the administration may be able to obtain its desired policy outcome in the future

centralised wage setting inflation contracts and the optimal choice of central banker the paper examines the appropriate design of central banking institutions in an economy in which the nominal wage is set by an inflation averse monopoly union as a positive mark up over its market clearing value the analysis considers both the optimal choice of central banker and the potential role for a linear inflation contract the optimal set of arrangements is a central banker who attaches less significance to inflation than does society combined with an inflation contract where the value of the contract parameter is related to the union s degree of inflationaversion following the important contribution of rogoff 1985 the appointment of a conservative central banker has been widely accepted as a potential albeit partial solution to the time inconsistency problem associated with discretionary policy making in placing a greater weight on inflation than does the government and society as a whole in the setting of monetary policy the central bank s temptation to create inflation surprises is reduced this then leads to a lower inflation rate in equilibrium than would otherwise prevail whilst in rogoff s stochastic framework this reduction in the inflationary bias has to be weighed against an increase in output variability the appropriate choice of central banker ensures a net improvement in welfare an important feature of rogoff s model is the assumption of an atomistic labour market in which nominal wages embodied in single period contracts reflect interaction between agents who hold no market power such a representation of the labour market also characterises most subsequent extensions of rogoff s analysis e g lohmann 1992 and waller 1992 however a number of recent papers in considering the time inconsistency issue have employed the assumption of unionised wage setting assuming either an allencompassing monopoly union or alternatively a number of individual unions each of which has a non negligible impact on macroeconomic variables examples include agell and ysander 1993 bleaney 1996 cubitt 1992 1995 horn and persson 1988 hutchison and walsh 1998 and skott 1997 these contributions have examined the implications of the assumed labour market imperfection from a variety of perspectives but only those of bleaney and skott directly consider its consequences for the appropriate specification of central bank objectives in what follows we explore the significance of unionised wage setting for

cooperative monetary and fiscal policies in the euro area this article discusses the interaction of fiscal and monetary policy in the euro area though many observers suggest a fiscal union as the next step of euro area constitutional reform a federal fiscal union does not appear politically feasible in the short run we suggest moving forward with cooperative monetary and fiscal institutions and policies that allow for decentralized fiscal decisions while taking federal stabilization policies into account this approach will increase the probability of survival of the euro area compared with the current fiscal arrangements using a dynamic macro model counterfactual simulation paths of our cooperative solution are contrasted with time series data for the euro area

market efficiency and risk premia in short term forward prices abstract using recursive estimation and rolling windows over extended sample periods we examine the time varying relationship between spot and short term forward prices in the pennsylvania new jersey maryland pjm wholesale electricity market we examine theoretical models of forward risk premia in electricity markets and show that recent data do not provide support for existing models the results indicate that short term forward prices have converged towards unbiased predictors of the subsequent spot prices

money debt and deficits in a dynamic game this paper analyzes a dynamic linear quadratic game between the fiscal and monetary authorities the equilibrium outcome of the game determines the time path of money creation fiscal deficits and public debt the game is solved for different equilibrium concepts the equilibria are then compared and interpreted with reference to alternative institutional arrangements the main results are i coordination increases the speed of adjustment towards the steady state and takes the steady state value of public debt closer to the desired target ii precommitments take the non cooperative equilibrium closer to the coordinated outcome iii increasing the weight that each policymaker assigns to his own private objectives slows down the adjustment process places more burden on the opponent but has ambiguous effects on the steady state value of public debt

anticipated inflation and the capital stock in a cash in advance economy abstract an economy is constructed in which the steady state capital stock is inversely related to the rate of inflation as a result that is directly opposite the usual conclusion

risk premia in the german day ahead electricity market revisited the impact of negative prices abstract this paper replicates the study by viehmann 2011 that investigated risk premia in the german day ahead electricity market from october 2005 to september 2008 while estimated sizes of risk premia can be replicated this paper does not reproduce respective standard errors leading to remarkable differences between the reported significance levels an extension with data of preceding years points to further differences with respect to size and statistical significance in addition this paper analyzes the impact of negative prices on risk premia negative electricity prices were introduced in 2008 at the european power exchange epex and in 2013 at the energy exchange austria exaa the results of an econometric analysis suggest that the introduction of negative prices has led to a decrease in risk premia when compared to the period of a positive price regime

political shocks and public debt the case for a conservative central bank revisited abstract we explore the dynamics of public debt and optimal institutions in the presence of political shocks arising from electoral uncertainty under commitment optimal stabilization is established by combining an inflation target with a debt target the inflation target should be contingent on the political shocks while the debt target forces the government to fully absorb the political shocks in the period in which it occurs in the absence of such inflation and debt targets but with monetary commitment a conservative central bank enhances stabilization an even more conservative central bank is optimal if monetary policy cannot commit

risk premiums in the german day ahead electricity market this paper conducts an empirical analysis of risk premiums in the german day ahead electricity wholesale market we compare hourly price data of the european energy exchange eex auction and of the continuous over the counter otc market which takes place prior to the eex auction data provided by the energy exchange austria exaa has been used as a snapshot of the otc market two hours prior to the eex auction ex post analysis found market participants are willing to pay both significant positive and negative premiums for hourly contracts the largest positive premiums were paid for high demand evening peak hours on weekdays during winter months by contrast night hours on weekends featuring lowest demand levels display negative premiums additionally ex ante analysis found a strong positive correlation between the expected tightness of the system and positive premiums for this purpose a tightness factor has been introduced that includes expectations of fundamental factors such as power plant availability wind power production and demand hence findings by longstaff and wang 2004 can be supported that power traders in liberalised markets behave like risk averse rational economic agents

wind power integration and power system flexibility an empirical analysis of extreme events in germany under the new negative price regime abstract in this article the flexibility of the german power market with respect to the integration of an increasing share of electricity from renewable energy sources was analysed flexibility limiting system components which cause negative prices are explained and illustrated for the german market the decision of the european energy exchange in leipzig to allow negative price bids is then explained the empirical data illustrate the flexibility of conventional generating capacities in germany from october 2008 to december 2009 of the 86 h of negative spot prices 19 h were significantly negative with prices of at least 100 mwh these extreme hours were analysed in greater detail by the examination of different system components thereby load wind power infeed and conventional generation by fuel type were observed as well as the market for negative tertiary reserve as indicators for market tightness although the market situations were found to be severe under the current conditions it could have been much worse in order to enable the market to clear at all times policy recommendations are provided and long run implications of an increasing res e share on the conventional generation capacity are discussed the article concludes with an outlook on additional power system flexibility options

electricity wholesale market prices in europe convergence abstract this paper tests the hypothesis that the ongoing restructuring process in the european electricity sector has led to a common european market for electricity based on a principal component analysis pca of wholesale electricity prices in 2002 2006 we reject the assumption of full market integration for several pairs of countries the weaker hypothesis of bilateral convergence is accepted based on unit root tests kpss and adf and a convergence test based on filtered pairwise price relations this indicates that the efforts to develop a single european market for electricity were so far only partially successful we show that the daily auction prices of scarce cross border transmission capacities are insufficient to explain the persistence of international price differentials empirically our findings confirm the insufficiency of explicit capacity auctions as stated in the theoretical literature

monetary union without fiscal coordination may discipline policymakers abstract with benevolent policymakers and fiscal leadership monetary unification reduces inflation taxes and public spending these disciplining effects of a monetary union which become stronger if the number of participants in the union increases are likely to raise welfare two types of arrangements are considered for the union s common central bank ccb making the ccb more conservative and imposing an inflation target on the ccb in contrast to the results of svensson 1997 svensson l e o 1997 optimal inflation targets conservative central banks and linear inflation contracts american economic review 87 98 114 an optimally designed conservative ccb may outperform inflation targeting finally we find that fiscal coordination offsets the disciplining effects of monetary unification hence subsidiarity in fiscal policymaking may enhance welfare

do we really want an independent central bank the issue of an independent central bank is assessed in the context of experience in the u k economy the historical role of the bank of england is examined revealing that the success of anti inflation policy depends on the exchange rate regime as well as on the institutional arrangements holding between the bank and government inflation targets are discussed but independence is also addressed by seeing how other targets such as nominal gdp might perform the theoretical arguments for and against an independent central bank are discussed in detail it is argued that partial independence where the central bank enjoys autonomy in relatively good states and is overridden in bad states is the preferred form of independence attention is drawn to the costs arising owing to a lack of coordination of policy when the finance ministry may compete against the central bank in the case where the latter is independent copyright 1994 by oxford university press

designing fiscal and monetary institutions for a european monetary union this paper explores the conditions under which aeuropean monetary union emu is an optimum currencyarea the scope for an emu increases with theconvergence of structural and fiscal policies smallmoney holdings a conservative european central bank and dependent national central banks how nationalpolicies affect the rest of the union once the emu hasbeen established is also investigated the case forsurveillance of national structural and fiscalpolicies appears to depend mainly on the monetaryarrangements in the union

seigniorage inflation and reputation abstract this paper derives a reputational equilibrium for inflation in a model in which the sovereign obtains valuable seigniorage by issuing fiat money in exchange for real resources with contemporaneous perception of actual sovereign behavior and immediate adjustment of real cash balances to new information the friedman elasticity solution for maximal seigniorage is a reputational equilibrium more generally the objective of maximal seigniorage produces an equilibrium inflation rate equal either to a generalization of the friedman elasticity solution or to the rate at which the sovereign discounts future seigniorage adjusted for the growth rate whichever is larger the model formalizes the conjecture that inflation rates in excess of the friedman solution are attributable to high discount rates for future seigniorage

monetary conservatism and fiscal policy abstract does an inflation conservative central bank a la rogoff 1985 remain desirable in a setting with endogenous fiscal policy to provide an answer we study monetary and fiscal policy games without commitment in a dynamic stochastic sticky price economy with monopolistic distortions monetary policy determines nominal interest rates and fiscal policy provides public goods generating private utility we find that lack of fiscal commitment gives rise to excessive public spending the optimal inflation rate internalizing this distortion is positive but lack of monetary commitment generates too much inflation a conservative monetary authority thus remains desirable when fiscal policy is determined before monetary policy each period the monetary authority should focus exclusively on stabilizing inflation monetary conservatism then eliminates the steady state biases associated with lack of monetary and fiscal commitment and leads to stabilization policy that is close to optimal

co movements and spillovers of oil and renewable firms under extreme conditions new evidence from negative wti prices during covid 19 we test for the existence of volatility spillovers and co movements among energy focused corporations during the outbreak of the covid 19 pandemic inclusive of the april 2020 events where west texas intermediate wti oil future prices became negative employing the spillover index approach of diebold and yilmaz 2012 as well as developing a dcc figarch conditional correlation framework and using estimated spillover indices built on a generalised vector autoregressive framework in which forecast error variance decompositions are invariant to the variable ordering we examine the sectoral transmission mechanisms of volatility shocks and contagion throughout the energy sector among several results we find positive and economically meaningful spillovers from falling oil prices to both renewable energy and coal markets however this result is only found for the narrow portion of our sample surrounding the negative wti event we interpret our results being directly attributed to a sharp drop in global oil gas and coal demand rather than because of a sudden increase in oil supply while investors observed the us fracking industry losing market share to coal they also viewed renewables as more reliable mechanism to generate long term stable and low cost supply

interrelated factor demands for manufacturing a dynamic translog cost function approach abstract in this paper we report the results of estimating a joint model for labour capital and energy using the transcendental logarithmic cost function of christensen jorgenson and lau 1973 this allows us to determine both the own price and cross elasticities of substitution between labour capital and energy we combine a model of factor shares with a dynamic adjustment process for each factor we also impose on the cross equation restrictions necessary to provide additivity homogeneity and symmetry since the covariance matrix in systems of share relationships is singular we follow the suggestions of anderson and blundell 1982 and employ a mullivariate error corrrection model the results suggest that additivity symmetry and homogeneity restrictions do hold and that there are short run increasing returns to scale

dynamic energy demand models a comparison abstract this paper compares two second generation dynamic energy demand models a translog tl and a general leontief gl in the study of price elasticities and factor substitutions of nine swedish manufacturing industries food textiles wood paper printing chemicals non metallic minerals base metals and machinery several model specifications are tested with likelihood ratio test there is a disagreement on short run adjustments the tl model accepts putty putty production technology of immediate adjustments implying equal short and long run price elasticities of factors while the gl model rejects immediate adjustments giving out short run elasticities quite different from the long run the two models also disagree in substitutability in many cases