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The Stability of Electricity Prices: Estimation and Inference of the Lyapunov ExponentsMikael BaskBank of Finland - Research Tung LiuBall State University - Department of Economics Anna WiderbergGöteborg University - Department of Economics and Statistics 2006 Bank of Finland Research Discussion Paper No. 9/2006 Abstract: The aim of this paper is to illustrate how the stability of a stochastic dynamic system is measured using the Lyapunov exponents. Specifically, we use a feedforward neural network to estimate these exponents as well as asymptotic results for this estimator to test for unstable (chaotic) dynamics. The data set used is spot electricity prices from the Nordic power exchange market. Nord Pool, and the dynamic system that generates these prices appears to be chaotic in one case.
Number of Pages in PDF File: 23 Keywords: feedforward neural network, Nord Pool, Lyapunov exponents, spot electricity prices, stochastic dynamic system JEL Classification: C12, C14, C22 working papers seriesDate posted: October 2, 2007Suggested CitationContact Information
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