Downstream integration of natural gas prices across U.S. states: Evidence from deregulation regime shifts.
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Abstract
This study examines the cointegration between city-gate and residential retail natural gas prices at the U.S. state level using monthly data from 1989:1 to 2012:12. Both price series are tested for unit roots using the Harris (2009) procedure to endogenously identify structural breaks related to deregulation associated with FERC Order No. 636. The endogenously determined structural breaks are then used in the Saikkonen and Lütkepohl (2000a, 2000b, 2000c) maximum likelihood approach to test cointegration of the series. Tests show cointegration of the two price series for all 50 states. Estimates of the long-run relationship in the pre- and post-structural break periods result in mixed evidence about the degree of perfect market integration induced by deregulation, although the magnitude and variation of parameters indicate increased integration. A vector error correction model is used to infer causality in the short and long-run dynamics for the pre and post-structural break periods for each state. The post-break period exhibits bidirectional causality in both short and long-run dynamics for all states, an indication of greater downstream integration of the natural gas market.Citation
Apergis, N., Bowden, N., and Payne, J.E. (2015) 'Downstream integration of natural gas prices across US states: Evidence from deregulation regime shifts', Energy Economics, 49, pp.82-92.Publisher
ElsevierJournal
Energy EconomicsDOI
10.1016/j.eneco.2015.01.020Additional Links
https://www.sciencedirect.com/science/article/pii/S0140988315000377Type
ArticleLanguage
enISSN
0140-9883ae974a485f413a2113503eed53cd6c53
10.1016/j.eneco.2015.01.020
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