Volatility spillovers and carbon price in the Nordic wholesale electricity markets
研究了2010年1月至2022年3月北欧四个电力市场间的价格波动溢出效应，发现碳价格对波动溢出指数有5%的显著影响，瑞典是唯一的净波动溢出者。
This paper investigates price volatility and spillovers in the Nordic electricity wholesale markets. We use the Time-Varying Parameter Vector Autoregressive (TVP-VAR), Rolling Window-based VAR (RW-VAR), and high dimensional VAR with common factors (VAR-CF) methods and analyze the integration dynamics among these markets and impact of carbon prices on volatility spillovers. We use 107,352 hourly price data from January 2010 to March 2022. The novelty of this research is four-fold. First, we adopt a connectedness approach to explore volatility interactions among the four Nordic markets, contributing to the scarce literature on volatility in this market. Second, we segment the Norwegian market into southern and northern regions, revealing differences in volatility spillover patterns. Third, we investigate the effect of carbon prices on volatility spillovers and market dynamics. Last, we show significant contribution of covariances to interdependence among markets. We find significant connectedness between the Nordic markets, with an average Total Connectedness Index of between 50% (with a system of variance) and 90% (with a system of both variance and covariance). Sweden is the sole net volatility spillover transmitter, while Denmark experiences the largest shocks from the system. We further find that carbon prices exert a 5% significant impact on the volatility spillover index.