Switzerland’s electricity trade: A short-term forecasting model and an analysis of multivariate relationships

Abstract

This study analyses Switzerlandpsilas bilateral electricity trade with Germany, France, Italy, and Austria using monthly data for the 2002-2007 period. We develop a short-term univariate forecasting model for Swiss electricity trade. Next, we analyse the determinants of Switzerlandpsilas bilateral electricity trade using a multivariate approach. We take into account the information contained in relative prices and terms of trade. The in-sample predictive ability of the multivariate models are shown to be better than those of the naive and univariate models. In view of the forthcoming electricity market liberalisations, the information contained in the price variables along with the evidence on the substitution effects in imports and exports by source and destination countries can be valuable in understanding and predicting the future developments in the Swiss electricity trade.