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Article

Influence of Fluctuations in Fossil Fuel Commodities on Electricity Markets: Evidence from Spot and Futures Markets in Europe

1
Graduate School of Economics, Kobe University, Kobe 657-8501, Japan
2
The Kansai Electric Power Company, Incorporated, Osaka 530-8270, Japan
*
Author to whom correspondence should be addressed.
Energies 2020, 13(8), 1900; https://doi.org/10.3390/en13081900
Received: 4 March 2020 / Revised: 8 April 2020 / Accepted: 11 April 2020 / Published: 13 April 2020
(This article belongs to the Special Issue Empirical Analysis of Natural Gas Markets)
Using a fresh empirical approach to time-frequency domain frameworks, this study analyzes the return and volatility spillovers from fossil fuel markets (coal, natural gas, and crude oil) to electricity spot and futures markets in Europe. In the time domain, by an approach developed by Diebold and Yilmaz (2012) which can analyze the directional spillover effect across different markets, we find natural gas has the highest return spillover effect on electricity markets followed by coal and oil. We also find that return spillovers increase with the length of the delivery period of electricity futures. In the frequency domain, using the methodology proposed by Barunik and Krehlik (2018) that can decompose the spillover effect into different frequency bands, we find most of the return spillovers from fossil fuels to electricity are produced in the short term while most of the volatility spillovers are generated in the long term. Additionally, dynamic return spillovers have patterns corresponding to the use of natural gas for electricity generation, while volatility spillovers are sensitive to extreme financial events. View Full-Text
Keywords: electricity; crude oil; natural gas; coal; spillover effects electricity; crude oil; natural gas; coal; spillover effects
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MDPI and ACS Style

Liu, T.; He, X.; Nakajima, T.; Hamori, S. Influence of Fluctuations in Fossil Fuel Commodities on Electricity Markets: Evidence from Spot and Futures Markets in Europe. Energies 2020, 13, 1900. https://doi.org/10.3390/en13081900

AMA Style

Liu T, He X, Nakajima T, Hamori S. Influence of Fluctuations in Fossil Fuel Commodities on Electricity Markets: Evidence from Spot and Futures Markets in Europe. Energies. 2020; 13(8):1900. https://doi.org/10.3390/en13081900

Chicago/Turabian Style

Liu, Tiantian, Xie He, Tadahiro Nakajima, and Shigeyuki Hamori. 2020. "Influence of Fluctuations in Fossil Fuel Commodities on Electricity Markets: Evidence from Spot and Futures Markets in Europe" Energies 13, no. 8: 1900. https://doi.org/10.3390/en13081900

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