Unveiling endogeneity and temporal dependence in energy prices and demand in Iberian countries: a stochastic hidden Markov model approach



Linha de Pesquisa
Administração e Economia de Negócios

Jorge Antunes, Luis Alberiko Gil-Alana, Rossana Riccardi, Yong Tan, Peter Wanke



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Annals of Operations Research, v. 313, pp. 191–229. Abstract: In this paper, we analyze the temporal dependence in energy prices and demand using daily data of Portugal and Spain over the period 2007–2017. The methodology used is based on a stochastic Hidden Markov Model and the results indicate first that all significant relationships between energy prices and demands were found to be positive; second, spot prices are only time dependent on future prices and spot energy, while future energy is solely time dependent on spot energy behavior; third, future prices are not only autocorrelated but also time-dependent with spot energy and future energy demands level; and finally, spot energy is autocorrelated and time-dependent with future prices and future energy. Policy implications of the results obtained are presented at the end of the article.

Keywords: Renewables, Decarbonization, Iberian countries, Energy demand, Energy prices, Stochastic HMM, Copulas, Bootstrapped VAR models.

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