Master's thesis published as IWH Discussion Paper
| February 23, 2024
Early this week I got news that our paper on “The effects of the Iberian exception mechanism on wholesale electricity prices and consumer inflation: A synthetic-controls approach” got published as an IWH discussion paper! You can access the publication here.
The paper focuses on the Iberian exception mechanism, a policy enacted by the governments of Spain and Portugal amid the 2022 energy crisis to decouple the price of electricity from international gas prices with the ultimate goal of reducing the inflationary pressure on energy products.
Using synthetic control methods to estimate a counterfactual, we find that the intervention led to an average reduction of approximately 40% in the spot price of electricity between July 2022 and June 2023 in both Spain and Portugal. In terms of overall inflation, we observe notable differences between the two countries. In Spain, the intervention has an immediate effect, and results in an average decrease of 3.5 percentage points over the twelve months under consideration. In Portugal, however, the impact is small.
This project began as my Master’s thesis. After submitting it towards the completion of my degree, I was joined by two of my mentors, Christoph Wunder and Christoph Schult, whose expertise in causal inference and energy markets was crucial to turning the paper into a publication-worthy article. I am grateful to both of them for believing in this project and encouraging me throughout the editing process.