ESSAYS ON ELECTRICITY MARKET DYNAMICS IN DEVELOPING COUNTRIES
Abstract
The energy sector has been at the forefront of the global policy agenda over the past decade, driven by a confluence of critical problems. In particular, developing countries face a disproportionate economic burden due to their vulnerabilities, such as weak institutional frameworks, underdeveloped financial markets, and higher uncertainty in business environments. This dissertation focuses on electricity market dynamics in a developing country context, Turkiye, and explores how this market has responded to changes in the external environment.
The first essay explores the effects of monetary policy shocks on the Turkish electricity market. There is limited research on the impact of monetary policy transmission channels, notably the exchange rate, on the electricity markets in developing countries. Using unexpected monetary policy shocks for identification, this essay shows that monetary policy shocks create asymmetric market outcomes. Generators respond to unexpected expansionary monetary policy shocks by adjusting their output; however, a similar effect is not observed for unexpected contractionary monetary policy shocks.
The second essay estimates the effect of key macroeconomic variables on the capital structure and investment outcomes of small and medium-sized enterprises (SMEs) within the Turkish power sector, using a rich, novel dataset and panel data methods. This essay complements the existing body of literature by providing empirical estimates of the effects of macroeconomic variables on capital structure and investment dynamics in these countries.
Finally, the third essay evaluates the welfare effect of the temporary price cap implemented in 2017 on the Turkish electricity market following a natural gas supply disruption in December 2016. Using propensity score matching and panel data methods, this essay shows that regulatory intervention deteriorated the overall economic welfare in the electricity market.
Overall, this thesis delves into the intricate interplay between the energy transition and institutional settings in a developing country context. It aims to shed light on the specific challenges and obstacles faced by these countries as they strive to align their policies with those of developed economies.