This paper analyzes the behavior of the Iberian energy markets during the 2022–2023 period, marked by extreme uncertainty stemming from the Russia–Ukraine conflict, regulatory interventions, and significant shifts in the energy mix. Using daily data from the Iberian Electricity Market (MIBEL), the Iberian Gas Market (MIBGAS), and EU CO₂ emission allowance futures, we study return dynamics and spillovers through a Time-Varying Parameter Vector Autoregression (TVP-VAR) framework combined with the Diebold–Yılmaz connectedness approach and its frequency decomposition. This methodology allows us to capture both time variation and differences between short-run and long-run spillovers without relying on rolling windows. The results show a low-to-moderate level of overall Connectedness, with interactions mainly driven by high-frequency dynamics. MIBEL and MIBGAS exhibit strong short-run spillovers, while CO₂ futures remain relatively independent, acting as a weak net transmitter, especially in 2023. An apparent reduction in Connectedness is observed from 2022 to 2023, suggesting a normalization process following the peak of the energy crisis. Overall, the findings highlight the importance of time-varying and frequency-based approaches to properly capture market interactions during periods of structural stress.

Keywords

Iberian Electricity Market, Diebold-Yılmaz, Time-Varying Parameter Vector Autoregression, Connectedness