Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 267: The Stability and Volatility of Electricity Prices: An Illustration of (lambda, sigma-2) Analysis
Mikael Bask () and Anna Widerberg ()
Additional contact information
Mikael Bask: Monetary Policy and Research Department, Bank of Finland, Postal: P.O. Box 160, FIN-00101 Helsinki, Finland
Anna Widerberg: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: The aim of this letter is to discuss and illustrate what we call (lambda, sigma-2)analysis, which is a method to distinguish between the stability of a stochastic dynamic system and the volatility of a variable generated by this system. It is also emphasized that this method is able to generate new research questions for economic theory. The data set used in an empirical illustration is spot electricity prices from Nord Pool.
Keywords: Smooth Lyapunov Exponents; Stability; Stochastic Dynamic System; Volatility
10 pages, October 9, 2007
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