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When time series are observed with noise, the popular Augmented Dickey–Fuller (ADF) unit root test and Johansen's cointegration test are oversized: the ADF tends to conclude for stationarity too often and Johansen's test finds too many cointegrating relations. This fact is well-known but no simple solution has been proposed in the literature. In this work, we show why this happens and prove theoretically and by Monte Carlo simulations how three different filtering approaches can significantly improve the performance of the two tests applied to noisy data without harming their properties when observations are free from noise. We show how conclusions can change when using filtered time series in two real applications: one concerning wholesale electricity prices in European countries, and the second warning against pairs trading strategies based on spurious cointegrating relations among stock prices.

In this paper, we study a class of markets, among which we can mention agricultural and energy markets, characterized by seasonality, i.e., in which demand and/or supply conditions cyclically alternate with a precise and known periodicity. We propose a new theoretical framework based on a cobweb model with adaptive expectations, accordingly modified to be consistent with market’s seasonality. The model, consisting in a second-order non-autonomous difference equation, is investigated with the aim of understanding how the periodical nature of the market together with the agents’ expectation formation mechanism affects the resulting dynamics. We analytically prove the emergence of dynamical scenarios that are missing in the classic cobweb model for non-seasonal markets, such as quasi-periodic dynamics and an ambiguous role on stability of the expectation weight. Finally, we discuss their economic rationale with the help of numerical simulations. In such a peculiar economic framework, agents’ learning plays a key role to explain the dynamical properties of economic observables.

The empirical literature on electricity markets has highlighted a strong cointegrating relationship governing the dynamics of electricity and fuel prices. More recently the massive introduction of RES in electricity generation, fostered by generous supporting schemes, has influenced the shape and position of the supply function and consequently the equilibrium prices. We believe that the new competitive scenario may have influenced the fuel-electricity nexus with a different impact in day-ahead and balancing markets. Empirical evidence of the evolving fuels-electricity nexus is shown looking at one Italian zone across two samples characterized by a significant change in the level of RES penetration. We conduct the analysis taking into account both day-ahead and, for the first time, balancing market sessions. Results indicate that fuel prices are much less relevant in determining the dynamics of electricity prices in recent years characterized by high RES penetration. On the contrary, taking into account flexible thermal sources, we show that in the second sample balancing and fuel prices (especially gas) are in a long run equilibrium

Since January 1, 2011 the electricity exchanges of Italy and Slovenia are working under a mechanism of market coupling for their respective day-ahead sessions. Similar mechanisms are being implemented in many European countries to foster the integration of power markets that eventually will merge into one large European exchange. This paper is one of the first works in which, by analyzing market results, we try and assess the degree of integration of the Italian and Slovenian electricity markets due to the market coupling policy. Empirical results are useful to evaluate the success of the EU Price Coupling of Regions policy and suggest further enhancements.

The massive introduction of RES in electricity markets is recognized to have induced a merit order effect on wholesale prices. While day-ahead prices are likely to decline as RES-E production increases, the effects on balancing market sessions are more ambiguous. Taking into account the Northern Italian zone characterized by a high solar PV and hydro penetration, we provide empirical evidence that balancing quantities decreased while costs increased between two samples associated with low (2006–08) and high (2013–15) RES levels. We estimate balancing costs for different technologies and compare their dynamics across specific hours. We find evidence of increasing balancing prices in particular market conditions, that we interpret as a signal of strategic use of real time sessions by conventional producers prone to the merit order effect in the day-ahead market. We compare our results to those obtained in the German market (where, on the contrary, balancing costs have decreased) and postulate that the different market designs may explain these results. Our findings suggest that the Italian policy makers should carefully monitor all trading sessions, especially those close to real time, to avoid the exercise of market power by few operators allowed to guarantee system security and, additionally, to promptly adopt a capacity market.

The Freetown Layered Complex (FLC) is a massive mafic layered intrusion cropping out along the coast of Sierra Leone. The present combined geochemical and geochronological (40Ar/39Ar on plagioclase: 201·7 ± 0·7 and 202·3 ± 2·3 Ma; U–Pb on baddeleyite: 198·794 ± 0·048/0·071/0·22 Ma) study of the complex flags it as a high-Ti occurrence of the Central Atlantic Magmatic Province (CAMP). Sr–Nd–Pb–Os isotope data indicate that the FLC is unique with respect to previously studied CAMP occurrences, constituting a new isotopic end-member for this large igneous province (LIP). Notably, the contribution of ancient source(s) is required to explain its low 206Pb/204Pb and high 207Pb/204Pb. Although the internal isotopic variability of the FLC can be explained by modest assimilation (<10%) of lower crustal (granulitic) material, represented by a xenolith found within the complex itself, an atypical mantle source is required to account for its unusual Pb isotopic composition. We also present the first Hf isotopic data measured to date for CAMP rocks, which, in the case of the FLC, show a restricted range in 176Hf/177Hf, overlapping the ocean island basalt and mid-ocean ridge basalt fields on the terrestrial array, and can further be used to characterize the FLC isotopic end-member. We propose that the FLC formed by mixing of a predominantly asthenospheric parental magma with small volumes (1–3%) of geochemically highly enriched lamproitic melts derived from the sub-continental lithospheric mantle in a geodynamic context in which a Proterozoic mobile belt (Rokelide) bordered an Archean craton (Man). Within the CAMP, similar isotopic compositions, in particular low 206Pb/204Pb and high 207Pb/204Pb, are found only in regions that were once contiguous with Sierra Leone. A comparable involvement of enriched components stored within the cratonic lithosphere may be envisaged for the high-Ti magmatism in the CAMP and two other LIPs of the South Atlantic realm, Karoo and Paraná–Etendeka.

We empirically investigate the effect of RES generation on the Italian spot and regulation prices by examining price dynamics from 2012 to 2014 in day-Ahead, intra-daily and balancing market sessions. Intra-day sessions are particularly valuable for intermittent generators willing to adjust their production programs as better weather forecasts become available. We model the relationships among spot, adjustment and regulation prices and provide empirical evidence that the intra-daily sessions are well-functioning and low-cost market tools to ease the introduction of a high share of RES. Conventional production units may bid on all market sessions but we estimate high and significant premia of readiness earned on real-Time sessions. Further, we evaluate the relationship among price differences, observed between regulation and spot markets and the amount of wind, solar, hydro, and geothermal production in all Italian zones, generally finding a positive and significant effect on premia.

Electricity generation from renewable energy resources (RES) has become increasingly significant to reach EU and emissions reduction targets. At the same time, one of the main EU policy goals has been the creation of a common internal energy market for Europe. In this paper, we focus on these two issues previously studied separately, considering their possible interactions. We first analyze the long-run relationship between day-ahead electricity prices and fuel prices (natural gas and coal) looking at two samples of years characterized by low and high RES penetration, then we explore the integration of EU markets. We show that the electricity–fuel nexus found over 2006–2008 changed dramatically over 2010–2014 for the majority of countries considered. In particular, the long-run dependence of electricity from gas and coal prices is much lower in recent years. Furthermore, our results confirm that the considered EU countries are becoming less integrated as RES-E increases. Our findings suggest that nationally implemented policies to support renewables are successful in increasing RES penetration, but they have lessened the linkage among EU markets, then making integration more difficult to obtain.

We analyse vertical integration between generators and retailers in electricity markets and we discuss the implications for price decisions of the presence of asymmetric (cost) information in a simple P-A framework.We analyze a situation in which generators post supply bids taking into account the profit of the entire vertically integrated group they belong to. We then discuss the way in which the degree of vertical integration affects this bidding strategy. Using Italian electricity auction data we show how bid prices posted by a pivotal producer are significantly influenced by variables incorporating vertical integration into the econometric model.

The Deccan large igneous province in India was emplaced temporally close to the Cretaceous–Palaeogene (K–Pg) boundary and is formed by tholeiitic flood basalts and less abundant alkaline rocks. Definition of the origin of Deccanmagmatism and of its environmental impact relies on precise and accurate geochronological analyses.We present new40Ar/39Ar ages from the northern sector of the province. In this area, tholeiitic and alkaline rocks were contemporaneously emplaced at 66.60 ± 0.35 to 65.25 ± 0.29 Ma in the Phenai Mata area, whereas rocks from Rajpipla and Mount Pavagadh yielded ages ranging from 66.40 ± 2.80 to 64.90 ± 0.80 Ma. The indistinguishable ages for alkaline and tholeiitic magmatism suggest that distinct mantle sources were synchronously active. The new ages are compared with previous ages, which were carefully screened and filtered and then recalculated to be comparable. The entire dataset of geochronological data does not support a time-related migration of the magmatismrelated to the northward Indian platemovement relative to the Reunion mantle plume. The main phase of magmatism, including the newly dated rocks from the northern Deccan, occurred at the K–Pg boundary. This suggests a causal link between the emplacement of the province and the K–Pg mass extinction.

We empirically analyze the relationship between wholesale electricity day-ahead and regulation prices in the presence of high share of RES generation. Our results only partly confirm those obtained by Skytte (1999) for the Oslo area. In the Italian case, regulating power prices follow spot prices and, in some cases, they are two or three times larger than the latter ones. We generally observe that the amount of regulation does not affect regulating power prices, even if they actually behave differently to up- and down-regulation. In addition, we find empirical evidence of very high premia for readiness with different behaviors according to Italian zones.

The relationship between wholesale electricity day-ahead and balancing prices is empirically investigated in Italy during years 2012-2014 characterized by high RES generation. We assess the situations of excess demand and excess supply with respect to the differences in quantities promised on the day-ahead market and actually delivered/demanded on real time; hence, we provide empirical evidence on Italian regulation power and corresponding prices. Our results partly confirm those obtained by Skytte (1999). We observe that regulating power prices are not influenced by the amount of regulation in both scenarios; even if they actually behave differently to up- and down-regulation. In addition, we quantify the premia of readiness according to specific selected hours and across Italian zones.

In this paper we study some dynamical features of electricity markets modelling demand and supply by means of a nonlinear cobweb model. We consider a demand function periodically perturbed to take into account the real world seasonalities (daily, weekly and yearly) while supply function can include a stochastic term that is able to encompass possible shocks like outages and plants unavailability. Using adaptive expectations we investigate the effects on equilibrium prices in a perturbed and in an unperturbed model considering peak and off-peak market configurations. The model we propose is based on a well known partial equilibrium model which is used to describe price dynamics of non-storable goods. The novelty we introduce is a sigmoid supply function and a periodically perturbed demand function. Our simulative investigations confirm that the model is able to reproduce several effects observed in real price dynamics. We also focus on how the dynamics can be influenced by altering some market rules set by regulators, like price caps and floors. In particular, we show that taking into account periodical perturbations in the demand function can lead to the anticipation, with respect to the classical model, of chaotic dynamics. Moreover, we study how the dynamic is influenced if negative prices are allowed.

Since January 1st, 2011 the electricity exchanges of Italy and Slovenia are working under a mechanism of market coupling for their respective day-ahead markets. Similar mechanisms are being implemented in many European countries to foster the integration of electricity markets that eventually will merge into one large European power market. This short paper is one of the first works in which, by analysing market results, we try to assess the degree of integration of the Italian and Slovenian electricity markets due to the market coupling policy.

This paper models supply prices coordination in electricity markets in which a group of rms is vertically integrated. We analyze vertical integration by removing the assumption of perfect inter- rms information within a group. Then, we discuss the implication to price decisions of the presence of asymmetric (cost) information between generators and retailers within a simple P-A framework. This permits us to interpret the presence of a pro t gap with respect to the group's maximum pro t, as the result of a costly coordination activity between generator and retailer. The empirical investigation is conducted using Italian electricity auction data. Results show that bid prices posted by generators are signi cantly a ected (i.e. moderated) by variables incorporating vertical integration into the econometric model. We discuss the magnitude and significance of these findings.

In many electricity markets the production capacity of a single supplier may be necessary to satisfy the total demand even when its competitors offer their total capacity. These pivotal suppliers are expected to sell at monopolistic prices on their portions of the market demand. In this paper, we show that these market conditions may imply the non-concavity in prices of the pivotal supply function, which in turn means that there can be situations in which a pivotal operator's supply has virtually no price limits. We also show that this monopolistic market power can be significantly reduced by vertical integration and/or regulatory policies such as virtual power plants. Based on these results, we propose a simple price-capping rule that induces the pivotal operator to compete for quantity instead of taking advantage of its monopoly. Then, we infer the profit function of the Italian pivotal operator (Enel) for the sample period 2007-2010 using real auction data and cost curves employed by engineers. We discuss the bidding behaviour of Enel and show how its profit function varies over time and in response to pro-competitive measures introduced during our sample period. We examine the existing price-cap and propose an alternative mechanism. © 2012 Elsevier Ltd. All rights reserved.

In this paper we consider an oligopolistic market in which one firm can be monopolist on her residual demand function and derive implications on the shape of her profit function, which we show may not be concave in price. We propose a simple price-capping rule that induce the pivotal operator to compete for quantity instead of taking advantage of her monopoly. Then, we analyze the bidding behaviour of the dominant electricity producer operating in the Italian wholesale power market (IPEX). This firm is vertically integrated and in many instances she acts as a monopolist on the residual demand. We find that, contrary to expectations, this pivotal firm refrains to exploit totally her unilateral market power and, therefore, bids at levels well below the cap. We discuss such a behaviour and derive implications for the setting of the price cap

In this paper we apply a model of optimal bidding behavior to the Italian wholesale electricity market under three hypotheses: i) costs of generation are private knowledge, ii) firms can be vertically integrated, and iii) firms can sell part of their production in advance with bilateral contracts. We first use optimal bid functions and market data to retrieve time-varying marginal cost functions, price-cost margins and Lerner Indexes of market power for a sample of Italian companies. Then, we use estimated costs and actual equilibrium prices to evaluate the elasticity of these series to fuel price variations and estimate a possible differential impact of the dynamics of input expenditures (fuel price above all) on generation costs and final electricity prices. Our estimates suggest that the elasticities of costs and equilibrium prices with respect to oil price are virtually the same and, therefore, that the auction mechanism per se does not limit the extent to which cost increases are transferred to prices. © 2011 Elsevier B.V.

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of a robust multivariate long-run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of a common long-term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across Europe and by the same marginal generation technology. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we also develop a battery of robust inference procedures that should assure the reliability of our results.

In this paper we examine the bidding behaviour of firm competing in the Italian wholesale electricity market where generators submit hourly supply schedule to sell power. We describe the institutional characteristics of the Italian market and derive generators' equilibrium bidding functions. We also discuss the main empirical strategies followed by the recent econometrical literature to obtain estimates of (unobservable) optimal bids. Then, we use individual bid data, quantity volumes and other control variables to compare actual bidding behaviour to theoretical benchmarks of profit maximization. We obtain estimates of generators' costs to be used in conjunction with hourly market equilibrium prices to derive some measures of the extent of market power in the Italian electricity sector and of its exploitation by firms. © 2010 IEEE.

In this paper we examine the bidding behaviour of firm competing in the Italian wholesale electricity market where generators submit hourly supply schedule to sell power. We describe the institutional characteristics of the Italian market and derive generators' equilibrium bidding functions. We also discuss the main empirical strategies followed by the recent econometrical literature to obtain estimates of (unobservable) optimal bids. Then, we use individual bid data, quantity volumes and other control variables to compare actual bidding behaviour to theoretical benchmarks of profit maximization. We obtain estimates of generators' costs to be used in conjunction with hourly market equilibrium prices to derive some measures of the extent of market power in the Italian electricity sector and of its exploitation by firms

Gli argomenti trattati nel volume sviluppano il tema dell’analisi economica del rapporto tra lo Stato (nelle sue varie articolazioni istituzionali) e la struttura economica della società. In tal senso costituiscono oggetto delle Lezioni di Scienza delle Finanze le analisi delle ragioni, delle forme, dei limiti e dei risultati dell’intervento pubblico nella sfera economica nei paesi a capitalismo maturo e nei paesi in via di sviluppo. Tali interventi vengono presentati a livello teorico – nell’ambito dei vari modelli che descrivono il funzionamento dei sistemi economici moderni – ed a livello empirico, ovvero discutendone le evidenze statistiche fondamentali. In tal senso una parte importante del manuale è dedicata all’analisi economica delle principali forme moderne dell’intervento pubblico rappresentate dalla tassazione, dalla spesa pubblica e dalla regolamentazione industriale. Il contenuto del volume può essere sintetizzato come segue. 1. Lo Stato e l’attività economica (Teorie classiche). 2. Richiami di Teoria del mercato: domanda ed offerta: Introduzione alla teoria del consumatore, alla teoria dell’impresa ed alla teoria dell’equilibrio nelle varie forme di mercato (Concorrenza, Monopolio, Oligopolio). 3. Economia del benessere: Primo e secondo teorema dell’economia del benessere. Loro implicazioni normative. Le ragioni dell’intervento dello Stato in presenza di fallimenti del meccanismo del mercato. Beni pubblici. Esternalità. Monopolio naturale. Asimmetrie informative. Fondamenti economici del Welfare State e delle moderne politiche di regolamentazione economica. 4. Scelte sociali ed efficienza economica: L’analisi dei meccanismi decisionali pubblici e le ripercussioni sull’efficienza economica. La funzione di benessere sociale. Il c.d. Teorema di Impossibilità di Arrow. I meccanismi di scelta elettorali in caso di democrazia diretta. I meccanismi di scelta elettorali in caso di democrazia rappresentativa. L’organizzazione federalista dello Stato. 5. Gli str

The paper presents a survey of theoretical and applied literature on internet auctions. On-line auctions represents an example of how new and flexible exchange procedures can be designed and offered to users of the net. New auction rules designed for internet auctions stimulated new theoretical and empirical research. In the paper, both theoretical and empirical aspects of market design will be considered in the light of the old and new auction literature.

In this paper we derive equilibrium bid functions in isolated domestic electricity markets and then analyse their modifications when cross-border trade among them is managed using the implicit auction method. We show that cross-border trade can induce price convergence across countries and thereby reallocate gains and losses as a result of two concomitant effects: a ¿volume¿ effect due to the mere increase/decrease of demand and supply in each market and a ¿bid effect¿ due to the modifications of bid functions brought about by interconnection. The latter effect can either contrast or reinforce the former. We derive conditions affecting the net result.

Molto spesso nell’analisi economica moderna vengono impiegate nozioni di calcolo delle probabilità la cui trattazione va leggermente oltre i programmi che normalmente costituiscono il bagaglio fondamentale acquisito dagli studenti dei corsi base di materie economiche. Ad esempio, nei corsi intermedi di ispirazione microeconomica in cui ampio è il riferimento all’ipotesi di asimmetrie nell’informazione su variabili rilevanti nella soluzione dei problemi di ottimo, la conoscenza di alcune nozioni di calcolo delle probabilità aggiuntive rispetto a quelle di base consente di interpretare meglio i risultati dei modelli stessi e i loro limiti. Analogamente, in quei casi in cui i risultati di modelli economici contemplano la valutazione di ordinamenti stocastici e della dominanza appare opportuno che gli studenti possano disporre di strumenti interpretativi più ampi di quelli acquisiti nei corsi introduttivi di calcolo delle probabilità. Avendo individuato negli studenti dei livelli formativi intermedi il proprio target di riferimento, il presente volume tenta quindi di fornire loro alcuni strumenti attraverso i quali orientarsi maggiormente nella lettura e nell’interpretazione di gran parte della letteratura economica contemporanea. Si è perciò scelto un profilo di trattazione che mantenesse costantemente un equilibrio tra esigenze di sistematicità e organicità ed esigenze di effettiva utilizzazione in relazione alla letteratura economica che resta sullo sfondo. Ciò si riflette nella selezione degli ambiti del calcolo delle probabilità trattati nel volume. Questi sono dati dalla Teoria dell’Affidabilità, dalle Statistiche Ordinate e dalla Dominanza Stocastica. A ciascuno corrisponde un apposito capitolo. Si è preferito, per ragioni di spazio, limitare l’insieme delle materie trattate in modo da poter svolgere un’esposizione piana, sufficientemente completa e accessibile, oltre che corredata da esempi ed esercizi. Ogni capitolo è completato dalle applicazioni a modelli eco

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.

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of a robust multivariate long run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of a common long term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across Europe and by the same marginal generation technology. Its knowledge may also be relevant for long term hedging operations to be conducted even in countries where well established and liquid electricity derivatives markets are not present. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we also develop a battery of robust inference procedures that should assure the reliability of our results.