Abstract
his paper examines price discovery between the Romanian day-ahead electricity market and five Central European neighbours — Hungary, Slovenia, Slovakia, Czechia, and Austria — using 4,101 daily observations from January 2015 to March 2026. We construct an equal-weighted regional price index (INDEX_EU) and apply nine methods: ADF/KPSS unit root tests, Engle–Granger and Johansen cointegration, bidirectional Granger causality, Toda–Yamamoto Wald tests, VECM speed-of-adjustment analysis, impulse response functions, forecast error variance
decomposition (FEVD), lead-lag cross-correlation, TAR/M-TAR asymmetry with bootstrap inference, and Diebold Mariano forecast comparison. Results reveal a robust long-run cointegrating relationship and bidirectional Granger causality indicating Romania actively
participates in regional price discovery. The VECM identifies rapid symmetric adjustment.At a 10-day horizon, 29.8% of Romanian price variance is attributable to regional shocks. The Diebold–Mariano test confirms that a bivariate VAR significantly outperforms a univariate AR benchmark , validating the predictive importance of cross-border price linkages.
decomposition (FEVD), lead-lag cross-correlation, TAR/M-TAR asymmetry with bootstrap inference, and Diebold Mariano forecast comparison. Results reveal a robust long-run cointegrating relationship and bidirectional Granger causality indicating Romania actively
participates in regional price discovery. The VECM identifies rapid symmetric adjustment.At a 10-day horizon, 29.8% of Romanian price variance is attributable to regional shocks. The Diebold–Mariano test confirms that a bivariate VAR significantly outperforms a univariate AR benchmark , validating the predictive importance of cross-border price linkages.
Cuvinte cheie
electricity market integration; price discovery; Granger causality; cointegration; Romania
Istoric articol
Publicat
26.06.2026
Informații autori
Citare recomandată
MIHAI FRUNZA, LUCIAN CLAUDIU ANGHEL (2026). BIDIRECTIONAL PRICE DISCOVERY BETWEEN ROMANIAN AND CENTRAL EUROPEAN ELECTRICITY MARKETS: EVIDENCE FROM COINTEGRATION AND VECM ANALYSIS. Constantin Brâncuși University of Târgu Jiu Economics Series, 1(3), 114–119. https://doi.org/10.65631/jes.3.2026.9
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18. Note (1) The Johansen trace statistic (845.14, CV5%=15.49) also rejects r≤1 (trace=74.22, CV5%=3.84), implying r=2 — equivalent to both series being I(0), contradicting unit-root evidence. This is a well-documented finite-sample distortion in large samples [3]. We impose rank 1 on economic grounds and confirm it via the residual ADF (p<0.001).
(2) The positive value for the non-normalised variable reflects partial integration (β<1); both markets adjust to shared disequilibria.
19. Bibliografie
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estimation, and testing, Econometrica, vol. 55, nr. 2, pp. 251-276, 1987
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