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on Regulation |
| By: | Rodrigo Harrison (Instituto de Economía. Pontificia Universidad Católica de Chile.); Gonzalo Hernández; Roberto Muñoz. |
| Abstract: | This paper studies the welfare implications of equilibrium behavior in a market characterized by competition between two interconnected telecommunication ?rms, subject to constraints: the customers belong to a social network. It also shows that social networks matter because equilibrium prices and welfare critically depend on how people are socially related. Next, the model is used to study e¤ectiveness of alternative regulatory schemes. The standard regulated environement, in which the authority de?nes interconnection ac cess charges as being equal to marginal costs and ?nal prices are left to the market, is considered as a benchmark . Then, we focus on the performance of two di¤erent regulatory interventions. First, access prices are set below marginal costs to foster competition. Second, switching costs are reduced to intensify competition. The results show that the second strategy is more efective to obtain equilibrium prices closer to Ramsey?s level. |
| Keywords: | Access charges, social networks, random regular graphs. |
| JEL: | C70 D43 D60 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:350&r=reg |
| By: | Eric Van Tassel |
| Abstract: | In this paper we analyze a repeated game in which an intermediary offers unsecured loans to entrepreneurs using future credit denial to induce repayment. To finance the loans, the intermediary uses a combination of equity capital and external funds. We focus on a moral hazard problem that emerges between the intermediary and the less informed external investors over a costly loan monitoring choice. The presence of informed borrowers in the lender’s portfolio turns out to act as a substitute for capital requirements. The result is that the lending strategy utilized by the intermediary minimizes the moral hazard problem but implies the intermediary’s balance sheet is fragile to exogenous risk. |
| Keywords: | Moral hazard; Capital requirements; Bank regulation; Repayment incentives |
| JEL: | G21 G28 O16 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:fal:wpaper:09003&r=reg |
| By: | Astrid Cullmann |
| Abstract: | In January 2009 Germany introduced incentive regulation for the electricity distribution sector based on results obtained from econometric and nonparametric benchmarking analysis. One main problem for the regulator in assigning the relative efficiency scores are unobserved firm-specific factors such as network and technological differences. Comparing the efficiency of different firms usually assumes that they operate under the same production technology, thus unobserved factors might be inappropriately understood as inefficiency. To avoid this type of misspecification in regulatory practice estimation is carried out in two stages: in a first stage observations are classified into two categories according to the size of the network operators. Then separate analyses are conducted for each sub-group. This paper shows how to disentangle the heterogeneity from inefficiency in one step, using a latent class model for stochastic frontiers. As the classification is not based on a priori sample separation criteria it delivers more robust, statistical significant and testable results. Against this backround we analyze the level of technical efficiency of a sample of 200 regional and local German electricity distribution companies for a balanced panel data set (2001-2005). Testing the hypothesis if larger distributors operate under a different technology than smaller ones we assess if a single step latent class model provides new insights to the use of benchmarking approaches within the incentive regulation schemes. |
| Keywords: | Stochastic frontiers, latent class model, electricity distribution, incentive regulation |
| JEL: | C24 C81 D24 L94 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp881&r=reg |
| By: | Raymond Ritter (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper analyses and assesses the track record and effectiveness of the so-called “Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets”,which have emerged as an important instrument for crisis prevention and crisis resolution in the international financial system. The paper argues that, notwithstanding their low profile, the Principles which were jointly agreed between sovereign debtors and their private creditors in 2004 have proved to be an effective instrument in spite of their voluntary and nonbinding nature. Indeed, an increasing number of sovereign debtors and private creditors have adopted the Principles’ recommendations on transparency and the timely flow of information, close dialogue, “good faith” actions and fair treatment. Two elements have been critical to the success of the Principles: (i) their specific design feature as a soft mode of governance agreed by a transnational public-private partnership and (ii) the “hardening” after their launch in terms of precision and delegation, thus moving them somewhat along the continuum of soft law and hard law towards the latter. The paper also makes the case that the Principles and their design features can provide some lessons for the current international policy debate on codes of conduct in global financial regulation.. JEL Classification: F34, F51, F53, G15, G18. |
| Keywords: | Crisis prevention, debt restructuring, sovereign default, soft law, transnational public-private partnership, global financial governance. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20090103&r=reg |
| By: | Tol, Richard S. J. (ESRI) |
| Abstract: | The EU has proposed four flexibility mechanisms for the regulation of greenhouse gas emissions in the period 2013-2020: (1) the Emissions Trade Scheme (ETS), a permit market between selected companies; (2) trade in non-ETS allotments between Member States; (3) the Clean Development Mechanism (CDM) to purchase offsets in developing countries; and (4) trade in CDM warrants between Member States. This paper shows that aggregate abatement costs fall as flexibility increases. However, limited flexibility creates rents so that increasing flexibility raises costs in some Member States. Costs are reduced more by the CDM than by non-ETS trade. The CDM warrants market reduces costs by a small amount only; market power is a real issue. However, the warrants market is obsolete in case there is non-ETS trade. The CDM leads to price convergence between the ETS and non-ETS market. There would be one price for carbon in the European Union if the proposed limits on CDM access are relaxed slightly |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp290&r=reg |
| By: | Baldursson, Fridrik M.; von der Fehr, Nils-Henrik M. |
| Abstract: | We consider an industry with firms that produce a final good emitting pollution to different degree as a side effect. Pollution is regulated by a tradable quota system where some quotas may have been allocated at the outset, i.e. before the quota market is opened. We study how volatility in quota price affects firm behaviour, taking into account the impact of quota price on final-good price. The impact on the individual firm differs depending on how polluting it is - whether it is `clean' or `dirty'- and whether it has been allocated quotas at the outset. In the absence of long-term or forward contracting, the optimal initial quota allocation turns out to resemble a grandfathering regime: clean firms are allocated no quotas - dirty firms are allocated quotas for a part of their emissions.With forward contracts and in the absence of wealth effects initial quota allocation has no effect on firm behaviour. |
| Keywords: | regulation; effluent taxes; tradable quotas; uncertainty; risk aversion; environmental management |
| JEL: | Q38 D81 L51 Q28 D9 H23 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14994&r=reg |
| By: | Kalemli-Ozcan, Sebnem; Papaioannou, Elias; Peydró-Alcalde, José Luis |
| Abstract: | Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization. |
| Keywords: | Banks; Business Cycles; Co-movement; Financial Integration; Financial Regulation |
| JEL: | E32 F15 F36 G21 O16 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7292&r=reg |
| By: | Gormsen, Christian (Department of Economics, Aarhus School of Business) |
| Abstract: | This paper analyzes anti-dumping (AD) policies in a two-country model with heterogeneous firms in monopolistic competition. Effective AD legislation in one country imposes a no-dumping condition on firms exporting from the other country, altering their pricing both domestically and abroad. Some firms with intermediate productivities cease export activity, and entry shifts towards the AD protected country, which has now become relatively more attractive. Protecting firms with AD therefore increases the number of firms entering and eventually increases competition, and the consumers enjoy welfare gains. In the country without AD legislation, there is a welfare loss due to fewer entrants. |
| Keywords: | Trade policy; Anti-dumping; Monopolistic competition; Heterogeneous firms |
| JEL: | F12 F13 |
| Date: | 2008–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2008_024&r=reg |
| By: | Djamel Kirat (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Ibrahim Ahamada (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | In order to comply with their commitments under the Kyoto Protocol, France and Germany participate to the European Union Emission Trading Scheme (EU ETS) which concerns predominantly electricity generation sectors. In this paper we seek to know if the EU ETS gives appropriate economic incentives for an e¢ cient and strong system in line with Kyoto commitments. Because if so electricity producers in these countries should include the price of carbon in their costs functions. After identifying the di¤erent sub periods of the EU ETS during its pilot phase (2005-2007), we model the prices of various electricity contracts and look at their volatilities around their fundamentals while evaluating the correlation between the electricity prices in the two countries. We finnd that electricity producers in both countries were constrained to include the carbon price in their cost functions during the rst two years of operation of the EU ETS. During this period, German electricity producers were more constrained than their French counterparts and the inclusion of the carbon price in the cost function of electricity generation has been so much more stable in Germany than in France. Furthermore, the European market for emission allowances has increased the market power of the historical French electricity producer and has greatly contributed to the partial alignment of the wholesale price of electricity in France with those of Germany. . |
| Keywords: | Carbon Emission Trading, Multivariate GARCH models, Structural break, Non Parametric Approach, Energy prices. |
| Date: | 2009–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00378317_v1&r=reg |