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International Advances in Economic Research

, Volume 13, Issue 4, pp 415–432 | Cite as

Deregulated Wholesale Electricity Prices in Italy: An Empirical Analysis

  • Bruno Paolo Bosco
  • Lucia P. Parisio
  • Matteo M. Pelagatti
Article

Abstract

In this paper we analyze a time series of daily average prices in the Italian electricity market, which started to operate as a Pool in April 2004. Our objective is to model the high degree of autocorrelation and the multiple seasonalities in electricity prices. We use periodic time series models with GARCH disturbances and leptokurtic distributions and compare their performance with more classical ARMA-GARCH processes. The within-year seasonal variation is modelled using the low-frequency components of physical quantities, which are very regular throughout the sample. Our results reveal that much of the variability in the price series is explained by the interactions between deterministic multiple seasonalities. Periodic AR-GARCH models seem to perform quite well in mimicking the features of the stochastic part of the price process.

Keywords

Electricity auctions Periodic time series Conditional heteroskedasticity Multiple seasonalities 

JEL Classification

C22 D44 L94 Q40 

Notes

Acknowledgments

This paper is part of a research program on the regulation of the electricity sector in Italy. We would like to thank the University of Milan­Bicocca for financing the research with a FAR 2003 (ex 60%) grant and MURST for a PRIN 2004 grant.

We thank REF (Researches in Economics and Finance, Milan, www.ref­online.it/eng/) for providing us with the Italian data, and particularly Pia Saraceno, Claudia Checchi, Edoardo Settimio and Mara Zanini for comments and suggestions. All other data discussed in the paper have been obtained from electronic publications downloaded from the web site of the International Energy Agency (www.iea.org/Textbase/stats/rd.asp).

An earlier version of this paper was presented at the Sixty­First International Atlantic Economic Conference. We thank Peter van der Hoek, Kinga Mazur, Martin McGuire and Michael Ye for useful comments.

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Copyright information

© International Atlantic Economic Society 2007

Authors and Affiliations

  • Bruno Paolo Bosco
    • 1
  • Lucia P. Parisio
    • 1
  • Matteo M. Pelagatti
    • 2
  1. 1.Department of Legal and Economic SystemsUniversity of Milan-BicoccaMilanItaly
  2. 2.Department of StatisticsUniversity of Milan-BicoccaMilanItaly

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