Raphael Chiappini (University of Bordeaux) will present a paper titled: Market integration or co-integration? New evidence on the dynamics of world natural gas prices
Abstract- Has the integration of European, North-American and Asian natural gas markets been fostered over the last few years due to growing LNG export capacities and an increasing market share of spot transactions? This is the key question this article sets out to answer in the furtherance of numerous articles written on this subject. For this purpose, we develop multivariate error correction models with structural breaks and asymmetric responses between gas references prices, oil prices, and coal price. We use daily prices of all references prices spanning from January 1, 2004, to May 20, 2016 for the North-American, Asian and European areas. We show that European and US gas markets appear to be integrated prior to 2010. More surprisingly, we also highlight that reversions to long-term equilibriums among both the Henry Hub and the NBP, and the Henry Hub and the JKM are highly asymmetric, a pattern which could be intuitively interpreted as the consequence, in a context of oversupplied markets, of market arbitrage strategies by exporting countries.