Measuring the connectedness of European electricity markets using the network topology of variance decompositions

The United Kingdom's 2016 decision to exit the European Union (Brexit)has emphasized the need to comprehend systemic risk in Europe. The liberalization of the European electricity markets has drawn much attention. This study uses the network topology of variance decompositions to research the connectedness of the European electricity markets. Our results show that the European electricity markets experienced relatively high connectedness during the sample period from 2013 to the end of 2017. The analysis of the network connectedness suggests that regulators could identify the markets that most threaten system stability. (C) 2019 Published by Elsevier B.V.