Faculdade de Economia da Universidade de Coimbra

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1 Faculdade de Economia da Universidade de Coimbra Grupo de Estudos Monetários e Financeiros (GEMF) Av. Dias da Silva, COIMBRA, PORTUGAL gemf@fe.uc.pt NUNO CARVALHO FIGUEIREDO, PATRÍCIA PEREIRA DA SILVA & PEDRO CERQUEIRA The Renewables Influence on Market Splitting: the Iberian Spot Electricity Market ESTUDOS DO GEMF N.º Este trabalho é financiado por Fundos Nacionais através da FCT Fundação para a Ciência e a Tecnologia no âmbito do projeto PEst-OE/EGE/UI0031/2014.

2 The Renewables Influence on Market Splitting: the Iberian Spot Electricity Market Nuno Carvalho Figueiredo a,b, Patrícia Pereira da Silva b,c, Pedro Cerqueira c,d This paper aims to assess the influence of wind power generation on the market splitting behaviour of the Iberian electricity spot markets. We use logit models to express the probability response for market splitting of dayahead spot electricity prices together with explanatory variables like, wind speed, available transmission capacity and electricity demand. The results show that the probability of market splitting increases with the increase of wind power generation. The European interconnection capacity target of 10% of the peak demand of the smallest interconnected market has to be reconsidered, in order to keep electricity market integration a reality. As demonstrated, investment in interconnection capacity has to follow the investment and deployment of further wind power capacity, so coordination policies governing both interconnection development and renewable incentives should be designed. Keywords Electricity Market Integration, Market Splitting, Renewable Energy JEL: C10, C35, D47 1. INTRODUCTION In Iberia, both the Portuguese and the Spanish wind power sectors were developed with extreme success (Batlle 2011; Moreno and Martínez Val 2011; Gelabert et al. 2011; Ruiz Romero et al. 2012), following the European targets for the promotion of Renewable Energy Source electricity (RES E), aiming to reduce dependency on imported fossil fuels and allowing for the reduction in Green House Gas emissions (European Union 2001; European Union 2009a). Comparing the hourly demand profile with the wind power installed capacity evolution in Iberia (Figure 1) we can observe that currently with the adequate climate conditions, wind power can supply a big share of electricity to the system. The large deployment of RES E generation and in particular of wind power in Europe was achieved by strong financial support mechanisms, like feed in tariffs, fiscal incentives, tax exemptions and other (Meyer 2003; Jager et al. 2011; Amorim et al. 2013). This poses new challenges, both in the technical sense and in the market design. Electricity systems a EFS Initiative, University of Coimbra, Sustainable Energy Systems MIT P, Coimbra, Portugal b INESCC, Coimbra, Portugal c Faculty of Economics, University of Coimbra, Coimbra, Portugal d GEMF, Grupo de Estudos Monetários e Financeiros,Coimbra, Portugal corresponding e mail: nuno.figueiredo@portugen.com

3 have to be restructured to accommodate RES E intermittency (Lynch et al. 2012) and policy design has to reflect required market integration of these technologies (Batlle et al. 2012; Benatia et al. 2013). Figure 1 Hourly demand and wind power installed capacity in Iberia The impact of high penetration of RES E on electricity as been discussed throughout a number of scientific papers and reports. In particular some of the issues discussed related with the high level growth of wind power installed capacity reported are: the importance of adequate interconnections and transmission capacities to transport excess production, electrical system fault endurance, available and flexible standby generating capacity to accommodate load variability and effective control or curtailment of wind power production (Söder et al. 2007; Franco and Salza 2011; Benatia et al. 2013). Also wind forecasting is fundamental to allow wind power load management and electrical system balancing (Milligan et al. 2009). Due to the almost inexistent marginal costs of RES E generation, they will come first in the merit order of power plant dispatch. Therefore, by displacing higher marginal cost electricity generation, one could expect some level of decrease on the electricity spot market prices. This fact is reported by several authors (Moreno and López; Sensfuß et al. 2008; Sáenz de Miera et al. 2008; Klessmann et al. 2008; Mauritzen 2010; Jónsson et al. 2010; Amorim et al. 2010; Cruz et al. 2011; Cutler et al. 2011; Gelabert et al. 2011; Mulder and Scholtens 2013). 2

4 Several authors have studied electricity market integration, as it is one of the main objectives in Europe. Studies were made concerning different geographic areas: De Vany & Walls (1999), Park, Mjelde, & Bessler (2006) in the US regional markets; Worthington, Kay Spratley & Higgs (2005) and Higgs (2009) in Australia; Bower (2002), Boisseleau (2004), Armstrong and Galli (2005), Zachmann (2008), Bosco et al. (2010), Bunn and Gianfreda (2010), Pellini (2012) and Figueiredo and Silva (2012 and 2013) in Europe. Nonetheless, literature lacks on the assessment of the impacts that the high penetration of RES E generation have on interconnected market behaviour. The market coupling/splitting mechanism and its behaviour considering the influence of high wind power penetration is therefore herein offered. In the following section a summary of the electricity market reform and an overview of the market coupling/splitting mechanisms, in place in the Iberian spot electricity markets, is given. The interconnections available in Iberia are described in Section 3 and the data used in this study is presented in Section 4. The estimated models are described in Section 5, followed by the analysis and discussion of results in Section 6. Conclusions can be found in Section REGIONAL ELECTRICITY MARKETS Successive European Directives (European Union 1997; European Union 2003a; European Union 2009b) where issued with the objective to established common rules for the various electricity markets in Europe, based on the liberalisation of the sector, without prejudice of the public service required and the access by the generators and consumers to the transmission and distribution grids (Jamasb and Pollitt 2005). These requirements are guaranteed by regulating authorities established in each country (Silva 2007). Member States would take necessary measures to facilitate transit of electricity between transmission grids in accordance with the conditions laid down (European Union 2003b; European Union 2009c) in order to achieve an adequate integration of national electricity transmission grids and associated increase of electricity cross border transfers, ensuring the optimization of the production infrastructure (Jacottet 2012). However, with this set up, back in 2006 market integration in Europe was still far from being achieved (Coppens and Vivet 2006), which led to the creation of Regional Electricity Markets, to provide an intermediate step for the consolidated European Electricity Market (ERGEG 2006). The interaction between electricity markets within a region can occur through high voltage interconnections with limited capacity. This limited interconnection capacity might have additional constraints due to the electricity physical behavior, originating unidentified flows not necessarily related with cross border trading or contracts. A consumer that contracted with one generator across the border will probably receive electricity from a different generator causing the so called Loop Flow Problem (Coppens and Vivet 2006). One of the preferred methods and currently used to link interconnected spot markets is through a market coupling mechanism, where markets with lower prices export electricity to markets with higher prices through interconnections (Meeus et al. 2009). If the interconnection capacity is large enough to accommodate the exported electricity flows 3

5 (without congestion) then the price is the same in both markets, otherwise market splitting occurs and two regional market prices are cleared (EPEX et al. 2010). The basis of this mechanism is the calculation of the Available Transfer Capacity (ATC), which is made by the Transmission System Operators (TSO) taking into account the safety and reliability of the electrical system, together with an allowable safety margin. Therefore import and export ATC can have different values depending on loop flows and technical constraints (Luna and Martínez 2011). Figure 2 Market coupling without congestion (EPEX et al. 2010) Figure 3 Market coupling with congestion market splitting (EPEX et al. 2010) 3. THE IBERIAN INTERCONNECTIONS The Portugal Spain electrical interconnection currently consists of eight HV lines. A new interconnection line between Tavira and P. Guzman is being constructed (to be concluded by REE on the Spanish side) and another new line is forecasted to be in service by 2015 between V. Fria and O Covelo, which with several other internal line reinforcements will allow the completion of the interconnection capacity between Portugal and Spain of 3000 MW, essential for the joint Iberian electricity market MIBEL (REN 2013). Cross border interconnections offer numerous advantages under normal operating conditions, such as optimal power station daily production, increasing opportunities for operation with renewable energies, the promotion of competition and enhancement of supply security (Figueiredo and Silva 2012). However, interconnectors are limited and have constraints due to the physical behaviour of electricity, which flows through the easiest path. Therefore, high voltage grids interconnected through many interconnectors placed in different geographic positions originate unidentified flows not necessarily related with cross border contracts causing congestion of transmission lines and interconnectors, the so called Loop Flow Problem (Coppens and Vivet 2006). It is the TSO responsibility to manage the above mentioned constraints (Turvey 2006) and to deal specifically with cross border exchanges in electricity, which in turn have to comply with European Community Regulation 1228/2003/EC of 26 June 2003 and also later with European Community Regulation 714/2009 of 13 July These regulations establish a set of rules for cross border exchanges in electricity, in order to enhance competition, establish a compensation mechanism for cross border flows of electricity, setting principles on cross border transmission charges and allocating available capacities of interconnections (European Union 2003c; European Union 2009c). With the third legislative package the creation of the European Network of Transmission System 4

6 Operators (ENTSO) was established, aiming to prepare network codes to guarantee an efficient transmission network management, together with allowing trade and supply of electricity across borders. The Agency for the Cooperation of Energy Regulators (ACER) requested ENTSO to draft the so called network codes, laying down common rules applicable to the energy sector (ENTSO E 2014a). As part of these, the Network Code on Capacity Allocation and Congestion Management (CACM) will establish the interconnection capacity allocation methods to be applied in the European markets. ACER has recommended the adoption of this code by the European Commission on the 26 th of May 2014 (ACER 2014). 4. DATA Hourly price data and ATC were extracted from the OMIE data download web page (OMIE 2013) for the day ahead spot electricity prices in /MWh, for Portugal and Spain. Demand data was extracted from the European Network of Transmission System Operators for Electricity data portal (ENTSO E 2014b). Additionally, wind power installed capacities in both Iberian countries were obtained from Eurostat statistics bulk data download web page (Eurostat 2013) and wind speed data extracted from Weather Underground web page (Weather Wunderground 2013). Wind speed data was then validated and averaged over each hour and geographically, considering the areas with higher concentration of wind parks installed in each country (The Wind Power 2013). In Figure 4 the spot electricity prices for the both Iberian countries are plotted, together with the corresponding differences. Market integration in Iberia was demonstrated in other studies (Figueiredo and Silva 2013a; Figueiredo and Silva 2013b), however we can still observe many market splitting occurrences. Concerning the ATC (Figure 5), the increase in interconnection capacity between the two Iberian countries is visible in the plot, with the last improvement being observed in mid It is also to note that ATC limitations are more often observed in the direction Spain to Portugal. 5

7 Figure 4 Spot electricity prices and corresponding differences in Iberia In Figure 6 the average wind speed in both Iberian countries is plotted and the reader can observe the big variability created in wind generation. However, we cannot see a clear seasonality in the wind speed pattern, which means that wind generation might be present throughout all seasons of the year. Summary statistics for the time series are presented in Table 1. Skewness and kurtosis values indicate that all price time series have non normal distribution, which is confirmed by Jarque Bera statistic rejection of the null for normal distribution testing. 6

8 Figure 5 Available Transfer Capacities in Iberia Figure 6 Wind speed in Iberia 7

9 Table 1 Time series summary statistics MIBEL MIBEL Portugal Spain Price difference PT ES ATC ES PT ATC PT ES Demand Spain Demand Portugal Wind Speed Spain Wind Speed Portugal [ /MWh] [ /MWh] [ /MWh] [MW] [MW] [MW] [MW] [km/h] [km/h] Mean Median Maximum Minimum Std. Dev Skewness Kurtosis Jarque Bera Probability Observations MODEL ESTIMATION The estimated models aim to provide indications about the behaviour of the market splitting mechanism in the Iberian spot electricity markets, considering the wind power penetration in these same markets. We have modelled the probability of market splitting as a function of relevant explanatory variables related with wind power generation and market splitting mechanism. To model the split probability we can describe it in terms of a non observable latent variable (Split*) such that: 1, 1 0 (1),where Split is the binary variable of occurring market splitting conditional to X explanatory variables and e is the error term. In order to overcome some limitations of the linear probability models, namely the fact that we can obtain probabilities below zero or above one (Davidson and Mackinnon 2004), through a transformation function we have used models of the form: 1,, 1 0 (2),where G is a cumulative distribution function (cdf), which in the case of the probit model is the normal distribution cdf, where e has a standard normal distribution, and in the case of the logit is the logistic distribution cdf, where e has a standard logistic distribution. 8

10 We have opted to use the logit model as our binary response model, due to the fact that the probit model latent error does not follow a normal distribution (Wooldridge 2003). Therefore: (3),where X is a matrix of explanatory variables and e is the error term that is an independently distributed variable following the standard logistic distribution, from which we can obtain, 1 Λ Λ, where Λ (4) In this study the wind speed is the main explanatory variable used in our models, expressing the amount of electricity generated from wind energy sources. The two other explanatory variables used are related with demand of each country and the ATC between both spot electricity markets. The former expresses the ability of the country to consume the electricity produced by wind energy sources and the latter expresses the ability to export the electricity generated at lower marginal costs. Wind power curves are well described by a third order polynomial in the wind speed (Joensen et al. 1999; Stathopoulos et al. 2013). Therefore we modelled the probability of market splitting as a function of the ratio of the third order polynomial in wind speed and the demand in each spot electricity market, following the concept of wind power penetration level (Jónsson et al. 2010). Another concept introduced in the model is the ratio of ATC to demand expressing the size of interconnection capacity compared with the demand of each market. The estimated model associated to the latent variable is:,where Split is the binary variable of occurring market splitting, WS PT and WS ES are the average wind speeds in Portugal and Spain respectively, ATC PT ES and ATC ES PT the available transmission capacity for both directions of the interconnections and D PT and D ES the demand in Portugal and Spain respectively. In the estimated models (Table 2) all coefficients are significant to 0.1%, having a value for Percent Correctly Predicted of 79.69%, in spite of the rather low McFadden pseudo R 9

11 square. The Neglected Heterogeneity specification issue might have an influence on the coefficient estimates causing an underestimation of the effects, however relative effects of the explanatory variables can be extracted (Mood 2009; Wooldridge 2010). Table 2 OMIE market splitting model 1 No Heteroskedasticity correction Dependent variable: Split Coefficients: Estimate Std. Error z value Pr(> z ) <2e 16 *** <2e 16 *** <2e 16 *** <2e 16 *** <2e 16 *** <2e 16 *** <2e 16 *** <2e 16 *** <2e 16 *** Signif. codes: 0 *** ** 0.01 * Log likelihood: 1.784e+04 on 9 Df Studentized Breusch Pagan test data: ms.logit BP = , df = 8, p value < 2.2e 16 Percent correctly predicted: 79.69% McFadden pseudo R squared: 'log Lik.' (df=9) Another present specification issue is the heteroskedasticity of the error term, which is observed in the estimated model. In order to overcome this, an additional model was estimated attempting to correct this issue, 1 Λ,, ~Λ 0,exp 2 (5) 1 Λ,, ~Λ 0,exp 2 (6),where X is a matrix of explanatory variables belonging to the original information set and a vector of parameters to be estimated (Davidson and Mackinnon 2004). The market splitting probability is then not only dependent on the original regression function, but also on the skedastic function. The correction attempted was done by considering the ratio 10

12 average wind speed over demand, both in Portugal and Spain. These variables were initially chosen due to to high variability expected in the wind speed, thus in the wind power generated. The inclusion of further variables in the correction term made the model not to converge and are not herein presented. Table 3 OMIE market splitting model 2 WS/D Heteroskedasticity correction Dependent variable: Split Coefficients (binomial model with logit link): Estimate Std. Error z value Pr(> z ) e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** e e <2e 16 *** Latent scale model coefficients (with log link): Estimate Std. Error z value Pr(> z ) <2e 16 *** Signif. codes: 0 '***' '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1 Log likelihood: 1.758e+04 on 11 Df LR test for homoskedasticity: on 2 Df, p value: < 2.2e 16 Dispersion: 1 Number of iterations in nlminb optimization: 26 Percent correctly predicted: 79.41% McFadden pseudo R squared: 'log Lik.' (df=11) The logit model coefficients cannot be interpreted directly so predicted probabilities were calculated for some created data sets as shown and analysed in the next section. 6. ANALYSIS AND DISCUSSION OF RESULTS Prediction results from the models express that market splitting probability increases when the wind speed is higher, consequently with higher wind power generation (Figure 7). This can be explained by having low marginal cost electricity available to flow across the 11

13 border. It is to note the steep inflexion of the surface around a certain average wind speed (10 km/h for Spain in model 2 and 20 km/h for Portugal in both models), meaning that market splitting probability as a dramatic increase above a determined wind speed. Also to note is the loss of symetry when introducing the heroskedasticity correction, which may actually make sense due to the different sizes of the Portuguese and the Spanish electricity markets. With low average wind speeds in Spain the market splitting probability responds quite drastically to an increase in the Portuguese wind speed, whilst this effect looses its influence when the average wind speed increases in Spain. Model 2 in this respect has a more consistent behaviour than model 1 as the different sizes of the electrical systems play a role in the asymmetric behaviour of the market splitting probability. Further predictions were then made at different average wind speeds to evaluate probability response to ATC and demand. Figure 7 OMIE Predicted probability response to average wind speed Market splitting probability decreases with increasing ATC (allowing higher flows of electricity between markets), as one could expect by the concept definition of market splitting (Figure 8). Considering the mean of the average wind speed and the existing interconnection capacity between both spot electricity markets we can conclude that the existing interconnection level is adequate, bearing in mind that it is actually higher than the European Union recommendation of 10% of the peak demand of the smaller interconnected market (Amorim et al. 2014). The same tendency of decreasing probability response to increasing ATC can be seen in both models estimated, however different shapes for the probability response surfaces can be observed with increasing average wind speed (Figure 10 and Figure 11 of Appendix A). Moreover, in order to have a reasonable market splitting probability level and maintain both spot electricity markets integrated, the 12

14 requirements for interconnection capacity should increase with increasing available wind power. Notwidstanding the specification issues of the estimated models and considering the double of the wind power generation level available in the system (corresponding to an average wind speed level of 10 km/h), we estimate that in order to maintain the current market splitting occurrence probability (around 5% with an ATC of 2500 MW and at mean average wind speed), the interconnection capacity should be increased to 3700 MW (Table 4). Table 4 OMIE market splitting probability estimates WS/D heteroskedasticity correction ATC level [MW] Mean of the average wind speed Average wind speed of 10 km/h % 11% % 10% % 9% % 8% % 7% % 6% % 5% Considering an average wind speed of 20 km/h, as observed in Figure 11, the market splitting probability response to ATC does not decrease significantly, demonstrating that there is a limit for wind power generation from where investment in increasing interconnection capacity is not capable of improving electricity spot market integration. 13

15 Figure 8 OMIE Predicted probability response to ATC at mean average wind speed Figure 9 OMIE Predicted probability response to demand at mean average wind speed The probability response predictions to demand for the mean average wind speed in the estimated models are plotted in Figure 9. Here we can observe a different behaviour between the two models and an asymmetry between the Portuguese and Spanish 14

16 probability response behaviour to demand. By increasing demand in only one of the markets, generation with higher marginal costs in this market would set the clearing price, causing lower marginal cost electricity to be imported through the interconnection and leading eventually to a high probability of market splitting occurrence. This behaviour could explain model 1 at mean average wind speed for the Spanish demand response, but not the Portuguese demand response, maybe due to their relative sizes. This, of course, would only happen if there is enough lower marginal cost electricity in the other market, in this case in Portugal, otherwise an increasing demand would cause a decrease of the market splitting probability, as the available low marginal cost electricity would be consumed internally. This behaviour is actually consistent with the observed in model 2 at mean average wind speed. Also when the wind speed increases, having more low marginal cost electricity available in the system, the market splitting probability increases even with the increasing demand due to the available excess of low marginal cost electricity and inverting the normal behaviour of the system (Figure 13). 7. CONCLUSIONS One of the benefits of the integration of spot electricity markets is the optimization of RES E generation. The influence of high penetration of wind energy source electricity generation and its integration, together with the requirement to achieve an Iberian integrated electricity spot market is herein studied. Market splitting behaviour was modelled through logit models estimating the probabilities of its occurrence. It is shown that when the wind speed is higher, consequently having higher wind power generation available, market splitting probability increases. To maintain the same market splitting probability level with increasing wind speed, consequently with increasing available low marginal cost electricity in the system, the requirements for interconnection capacity have to increase. As demonstrated, investment in interconnection capacity has to follow the investment and deployment of further wind power capacity, so coordination policies governing both interconnection development and renewable incentives should be designed. Also as an indicative requirement, additional interconnection capacity to reach 3700 MW is required if Iberia doubles its available wind power generation, or any other low marginal cost generation, in the system. In order to accomplish the aimed future decarbonisation of the European Union s power sector, renewables expansion and in particular wind power generation will have to increase. Moreover, the reality of electricity market integration at a European level can only be aimed if the interconnection capacity target of 10% of the peak demand of the smallest interconnected market is re evaluated and increased. Availability of large amounts of wind power generation will have to be managed in order to optimize infrastructure. Regulation should be adjusted and coordinated to allow different mechanisms for optimization, deployment of effective energy storage facilities, wind power production curtailment and transmission system expansion. 15

17 Future work is required to explore other type of models, in order to overcome the limitations and specification issues of the logit models described in this paper. 8. ACKNOWLEDGEMENTS This Work has been framed under the Energy for Sustainability Initiative of the University of Coimbra, supported by the R&D Project EMSURE, Energy and Mobility for Sustainable Regions (CENTRO FEDER ) and also partially supported by the Portuguese Foundation for Science and Technology under project grant[s] PEst OE/ EEI/UI308/2014. This paper was written while the third author was a visiting scholar at the Economics Department of the University of Massachussets, Amherst with support of the FCT grant #SFRH/BSAB/1340/2013. We would also like to recognise the kind assistance provided by the Portuguese TSO REN for making data available. 16

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22 APPENDIX A Figure 10 OMIE No correction for heteroskedasticity ATC predicted probability response with 10, 15, 20 and 25 km/h average wind speed Figure 11 OMIE WS/D correction for heteroskedasticity ATC predicted probability response with 10, 15, 20, and 25 km/h average wind speed 21

23 APPENDIX B Figure 12 OMIE No correction for heteroskedasticity Demand predicted probability response with 10, 15, 20, and 25 km/h average wind speed Figure 13 OMIE WS/D correction for heteroskedasticity Demand predicted probability response with 10, 15, 20, and 25 km/h average wind speed 22

24 ESTUDOS DO G.E.M.F. (Available on-line at ) The Renewables Influence on Market Splitting: the Iberian Spot Electricity Market - Nuno Carvalho Figueiredo, Patrícia Pereira da Silva & Pedro Cerqueira Drivers for Household Electricity Prices in the EU: A System-GMM Panel Data Approach - Patrícia Pereira da Silva & Pedro Cerqueira Effectiveness of Intellectual Property Regimes: Noemí Pulido Pavón & Luis Palma Martos Dealing with Technological Risk in a Regulatory Context: The Case of Smart Grids - Paulo Moisés Costa, Nuno Bento & Vítor Marques Stochastic Volatility Estimation with GPU Computing - António Alberto Santos & João Andrade The Impact of Expectations, Match Importance and Results in the Stock Prices of European Football Teams - Pedro Godinho & Pedro Cerqueira Is the Slovak Economy Doing Well? A Twin Deficit Growth Approach - Elias Soukiazis, Eva Muchova & Pedro A. Cerqueira The Role of Gender in Promotion and Pay over a Career - John T. Addison, Orgul D. Ozturk & Si Wang Output-gaps in the PIIGS Economies: An Ingredient of a Greek Tragedy - João Sousa Andrade & António Portugal Duarte Software Piracy: A Critical Survey of the Theoretical and Empirical Literature - Nicolas Dias Gomes, Pedro André Cerqueira & Luís Alçada Almeida Agriculture in Portugal: Linkages with Industry and Services - João Gaspar, Gilson Pina & Marta C. N. Simões Effects of Taxation on Software Piracy Across the European Union - Nicolas Dias Gomes, Pedro André Cerqueira & Luís Alçada Almeida A Crise Portuguesa é Anterior à Crise Internacional - João Sousa Andrade Collective Bargaining and Innovation in Germany: Cooperative Industrial Relations? - John T. Addison, Paulino Teixeira, Katalin Evers & Lutz Bellmann Market Efficiency, Roughness and Long Memory in the PSI20 Index Returns: Wavelet and Entropy Analysis - Rui Pascoal & Ana Margarida Monteiro Do Size, Age and Dividend Policy Provide Useful Measures of Financing Constraints? New Evidence from a Panel of Portuguese Firms - Carlos Carreira & Filipe Silva A Política Orçamental em Portugal entre Duas Intervenções do FMI: Carlos Fonseca Marinheiro Distortions in the Neoclassical Growth Model: A Cross-Country Analysis - Pedro Brinca Learning, Exporting and Firm Productivity: Evidence from Portuguese Manufacturing and Services Firms - Carlos Carreira Equity Premia Predictability in the EuroZone - Nuno Silva Human Capital and Growth in a Services Economy: the Case of Portugal - Marta Simões & Adelaide Duarte Does Voter Turnout Affect the Votes for the Incumbent Government? - Rodrigo Martins & Francisco José Veiga Determinants of Worldwide Software Piracy Losses - Nicolas Dias Gomes, Pedro André Cerqueira & Luís Alçada Almeida

25 Estudos do GEMF Despesa Pública em Educação e Saúde e Crescimento Económico: Um Contributo para o Debate sobre as Funções Sociais do Estado - João Sousa Andrade, Marta Simões & Adelaide P. S. Duarte Duration dependence and change-points in the likelihood of credit booms ending - Vitor Castro & Megumi Kubota Job Promotion in Mid-Career: Gender, Recession and Crowding - John T. Addison, Orgul D. Ozturk & Si Wang Mathematical Modeling of Consumer's Preferences Using Partial Differential Equations - Jorge Marques The Effects of Internal and External Imbalances on Italy s Economic Growth. A Balance of Payments Approach with Relative Prices No Neutral. - Elias Soukiazis, Pedro André Cerqueira & Micaela Antunes A Regional Perspective on Inequality and Growth in Portugal Using Panel Cointegration Analysis - Marta Simões, João Sousa Andrade & Adelaide Duarte Macroeconomic Determinants of the Credit Risk in the Banking System: The Case of the GIPSI - Vítor Castro Majority Vote on Educational Standards - Robert Schwager Productivity Growth and Convergence: Portugal in the EU Adelaide Duarte, Marta Simões & João Sousa Andrade What Determines the Duration of a Fiscal Consolidation Program? - Luca Agnello, Vítor Castro & Ricardo M. Sousa Minimum Wage Increases in a Recessionary Environment - John T. Addison, McKinley L. Blackburn & Chad D. Cotti The International Monetary System in Flux: Overview and Prospects - Pedro Bação, António Portugal Duarte & Mariana Simões Are There Change-Points in the Likelihood of a Fiscal Consolidation Ending? - Luca Agnello, Vitor Castro & Ricardo M. Sousa The Dutch Disease in the Portuguese Economy - João Sousa Andrade & António Portugal Duarte Is There Duration Dependence in Portuguese Local Governments Tenure? - Vítor Castro & Rodrigo Martins Testing for Nonlinear Adjustment in the Portuguese Target Zone: Is there a Honeymoon Effect? - António Portugal Duarte, João Soares da Fonseca & Adelaide Duarte Portugal Before and After the European Union - Fernando Alexandre & Pedro Bação The International Integration of the Eastern Europe and two Middle East Stock Markets - José Soares da Fonseca Are Small Firms More Dependent on the Local Environment than Larger Firms? Evidence from Portuguese Manufacturing Firms - Carlos Carreira & Luís Lopes Macroeconomic Factors of Household Default. Is There Myopic Behaviour? - Rui Pascoal Can German Unions Still Cut It? - John Addison, Paulino Teixeira, Jens Stephani & Lutz Bellmann Financial Constraints: Do They Matter to R&D Subsidy Attribution? - Filipe Silva & Carlos Carreira Worker Productivity and Wages: Evidence from Linked Employer-Employee Data - Ana Sofia Lopes & Paulino Teixeira

26 Estudos do GEMF Slovak Economic Growth and the Consistency of the Balance-of-Payments Constraint Approach - Elias Soukiazis & Eva Muchova The Importance of a Good Indicator for Global Excess Demand - João Sousa Andrade & António Portugal Duarte Measuring Firms' Financial Constraints: A Rough Guide - Filipe Silva & Carlos Carreira Convergence and Growth: Portugal in the EU Marta Simões, João Sousa Andrade & Adelaide Duarte Where Are the Fragilities? The Relationship Between Firms Financial Constraints, Size and Age - Carlos Carreira & Filipe Silva An European Distribution of Income Perspective on Portugal-EU Convergence - João Sousa Andrade, Adelaide Duarte & Marta Simões Financial Crisis and Domino Effect - Pedro Bação, João Maia Domingues & António Portugal Duarte Non-market Recreational Value of a National Forest: Survey Design and Results - Paula Simões, Luís Cruz & Eduardo Barata Growth rates constrained by internal and external imbalances and the role of relative prices: Empirical evidence from Portugal - Elias Soukiazis, Pedro André Cerqueira & Micaela Antunes Is the Erosion Thesis Overblown? Evidence from the Orientation of Uncovered Employers - John Addison, Paulino Teixeira, Katalin Evers & Lutz Bellmann Explaining the interrelations between health, education and standards of living in Portugal. A simultaneous equation approach - Ana Poças & Elias Soukiazis Turnout and the Modeling of Economic Conditions: Evidence from Portuguese Elections - Rodrigo Martins & Francisco José Veiga The Relative Contemporaneous Information Response. A New Cointegration-Based Measure of Price Discovery - Helder Sebastião Causes of the Decline of Economic Growth in Italy and the Responsibility of EURO. A Balance-of-Payments Approach. - Elias Soukiazis, Pedro Cerqueira & Micaela Antunes As Ações Portuguesas Seguem um Random Walk? Implicações para a Eficiência de Mercado e para a Definição de Estratégias de Transação - Ana Rita Gonzaga & Helder Sebastião Consuming durable goods when stock markets jump: a strategic asset allocation approach - João Amaro de Matos & Nuno Silva The Portuguese Public Finances and the Spanish Horse - João Sousa Andrade & António Portugal Duarte Fitting Broadband Diffusion by Cable Modem in Portugal - Rui Pascoal & Jorge Marques A Poupança em Portugal - Fernando Alexandre, Luís Aguiar-Conraria, Pedro Bação & Miguel Portela How Does Fiscal Policy React to Wealth Composition and Asset Prices? - Luca Agnello, Vitor Castro & Ricardo M. Sousa The Portuguese Stock Market Cycle: Chronology and Duration Dependence -Vitor Castro The Fundamentals of the Portuguese Crisis - João Sousa Andrade & Adelaide Duarte The Structure of Collective Bargaining and Worker Representation: Change and Persistence in the German Model - John T. Addison, Paulino Teixeira, Alex Bryson & André Pahnke

27 Estudos do GEMF Are health factors important for regional growth and convergence? An empirical analysis for the Portuguese districts - Ana Poças & Elias Soukiazis Financial constraints and exports: An analysis of Portuguese firms during the European monetary integration - Filipe Silva & Carlos Carreira Growth Rates Constrained by Internal and External Imbalances: a Demand Orientated Approach - Elias Soukiazis, Pedro Cerqueira & Micaela Antunes Inequality and Growth in Portugal: a time series analysis - João Sousa Andrade, Adelaide Duarte & Marta Simões Do financial Constraints Threat the Innovation Process? Evidence from Portuguese Firms - Filipe Silva & Carlos Carreira The State of Collective Bargaining and Worker Representation in Germany: The Erosion Continues - John T. Addison, Alex Bryson, Paulino Teixeira, André Pahnke & Lutz Bellmann From Goal Orientations to Employee Creativity and Performance: Evidence from Frontline Service Employees - Filipe Coelho & Carlos Sousa The Portuguese Business Cycle: Chronology and Duration Dependence - Vitor Castro Growth Performance in Portugal Since the 1960 s: A Simultaneous Equation Approach with Cumulative Causation Characteristics - Elias Soukiazis & Micaela Antunes Heteroskedasticity Testing Through Comparison of Wald-Type Statistics - José Murteira, Esmeralda Ramalho & Joaquim Ramalho Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal - Pedro Bação & António Portugal Duarte Economic Voting in Portuguese Municipal Elections - Rodrigo Martins & Francisco José Veiga Application of a structural model to a wholesale electricity market: The Spanish market from January 1999 to June Vítor Marques, Adelino Fortunato & Isabel Soares A Smoothed-Distribution Form of Nadaraya-Watson Estimation - Ralph W. Bailey & John T. Addison Business Survival in Portuguese Regions - Alcina Nunes & Elsa de Morais Sarmento A Closer Look at the World Business Cycle Synchronization - Pedro André Cerqueira Does Schumpeterian Creative Destruction Lead to Higher Productivity? The effects of firms entry - Carlos Carreira & Paulino Teixeira How Do Central Banks React to Wealth Composition and Asset Prices? - Vítor Castro & Ricardo M. Sousa The duration of business cycle expansions and contractions: Are there change-points in duration dependence? - Vítor Castro Water Pricing and Social Equity in Portuguese Municipalities - Rita Martins, Carlota Quintal, Eduardo Barata & Luís Cruz Financial constraints: Are there differences between manufacturing and services? - Filipe Silva & Carlos Carreira Measuring firms financial constraints: Evidence for Portugal through different approaches - Filipe Silva & Carlos Carreira