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A1708
Title: A smooth transition duration model with an application to the deregulation of the Queensland electricity market Authors:  Paulina Joneus - Department of Statistics, Uppsala University (Sweden) [presenting]
Johan Lyhagen - Uppsala University (Sweden)
Abstract: The smooth transition duration model is introduced. It is designed to model the dependence of duration on explanatory variables allowing for a structural change. The proposed model is a generalization of parametric survival regression models and makes it possible to detect a non-linear behaviour when the response of interest is the time until some event occurs. A Lagrange multiplier test of the null hypothesis of linearity is derived together with the maximum likelihood estimators of the smooth transition duration model. The impact of the deregulation in the Queensland electricity market on the electricity spot price is then assessed by examining the time between abnormal price increases. The deregulation might have led to a change in the behaviour of the market participants and the smooth transition duration model is used to detect and examine such an eventual transition. The preliminary results show a clear support to a gradual change in the appearance of abnormal price increases.