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on Regulation |
| By: | Pierre Sauve (World Trade Institute, Berne, Switzerland) |
| Abstract: | This article takes stock of recent trends in the investment dimensions of deepening economic integration in Asia. |
| Keywords: | Investment, Regulation, Trade Agreements, Lessons, Asia |
| JEL: | F1 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:esc:wpaper:4907&r=reg |
| By: | Buiter, Willem H |
| Abstract: | The paper studies the causes of the current financial crisis and considers proposals for mitigation and prevention of future crises. The crisis is was the product of a ‘perfect storm’ bringing together a number of microeconomic and macroeconomic pathologies. Among the microeconomic systemic failures were: wanton securitisation, fundamental flaws in the rating agencies’ business model, the procyclical behaviour of leverage in much of the financial system and of the Basel capital adequacy requirements, privately rational but socially inefficient disintermediation, and competitive international de-regulation. Proximate local drivers of the specific way in which these problems manifested themselves were regulatory and supervisory failure in the US home loan market. Among the macroeconomic pathologies that contributed to the crisis were, first, excessive global liquidity creation by key central banks and, second, an ex-ante global saving glut, brought about by the entry of a number of high-saving countries (notably China) into the global economy and a global redistribution of wealth and income towards commodity exporters that also had, at least in the short run, high propensities to save. In the UK, failures of the Tripartite financial stability arrangement between the Treasury the Bank of England and the FSA, weaknesses in the Bank of England’s liquidity management, regulatory failure of the FSA, an inadequate deposit insurance arrangement and deficient insolvency laws for the banking sector contributed to the financial disarray. Despite this, it may well be possible to minimize the spillovers over from the crisis beyond the financial sectors of the industrial countries and the housing sectors of the US and a few European countries. |
| Keywords: | collateral; financial stability; leverage; liquidity; rating agencies; regulation; securitization |
| JEL: | D52 D53 E32 E44 E58 F37 G21 G24 G28 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6596&r=reg |
| By: | Asenova, Darinka; Beck, Matthias; Toms, Steven |
| Abstract: | The refinancing of PFI (Private Finance Initiative) projects currently represents one of the most contentious aspects of Public Private Partnership in the UK. The negative publicity associated with UK PFI refinancing deals is associated with two main factors, namely evidence of massive private sector profit making in connection with past refinancing deals, and the ‘failure’ of private sector financiers to share refinancing profits with public sector organisations in line with government recommendations. This paper examines the ongoing ‘dance of non-regulation’ associated with PFI refinancing on the basis of traditional Marxist notions of ‘contradictions of capitalism’. Our analysis commences with the argument that PFI represents a prototypical case of an alliance between finance capital and the state, which has been created with the principal purpose of establishing a new source of profits for the private sector. A Marxist analysis of state-business relationships would predict such an alliance to show tendencies towards instability which could arise from a number of factors. These include, among others, the inherent lack of legitimacy of such an alliance vis a vis established policy goals and the stakeholders associated with them; a lack of a credible regulatory framework which, as a systemic prerequisite of private sector profit making, further exacerbates existing problems of legitimation; and, perhaps most importantly, the potentially self-defeating attempt by capital to maximise gains from the exploitation of the existing alliance without concern for the possibility of a political or regulatory backlash. Examining the recent history of PFI refinancing we find evidence of most of these destabilising tendencies which we expect to trigger calls for a greater regulation of PFI projects in the future. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:wrc:ymswp1:35&r=reg |
| By: | Vareda, João |
| Abstract: | We study the impact of access regulation in a telecommunications market on an entrant's decision whether to invest in a network or ask for access when the regulator cannot observe its potential demand. Since the entrant has incentives to not compete vigorously right after entry in order to convince the regulator that it needs cheap access in the future, the regulator must set access prices which tend to be distorted (lower or higher) as compared to ?rst best. Still, this is better than committing to ignore ex post demand information. Consulting the entrant earlier about its expectations improves welfare and may help to achieve the first best. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp525&r=reg |
| By: | Vareda, João; Hoernig, Steffen |
| Abstract: | We analyze the impact of mandatory access on the infrastructure investments of two competing communications networks, and show that for low (high) access charges ?rms wait (preempt each other). Contrary to previous results, under preemption a higher access charge can delay ?rst investment. While ?rst-best investment cannot be achieved with a ?xed access tari¤, simple instruments such as banning access in the future, or granting access holidays right after investment, can improve e¢ ciency. The former forces investment when it would happen too late, while the latter allows for lower access charges in order to delay the second investment when it would happen too early. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp524&r=reg |
| By: | Dirk Engelmann (Royal Holloway, University of London); Dorothea Kübler (Technical University Berlin and IZA) |
| Abstract: | In order to address the impact of regulation on ethical concerns of consumers, we study the effect of a minimum wage. In our experimental market, consumers have monopsony power, firms engage in Bertrand competition, and workers are passive recipients of a wage payment. Two treatments are employed, one with no minimum wage in the first part but with a minimum wage in the second part, and one treatment with a minimum wage at the outset that is abolished in the second part. In both treatments, wages decrease over time in the first part even though some consumers show an interest in fair wages. If a minimum wage is in place, wages decline even faster. Introducing a minimum wage in a mature market raises average wages, while abolishing it lowers them. We discuss the implications of our results, such as the crowding out of ethical behavior through legal regulation. |
| Keywords: | fairness, crowding out, consumer behavior, minimum wage, experimental economics |
| JEL: | C91 J88 K31 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3266&r=reg |
| By: | Vareda, João |
| Abstract: | We study the investment of a telecommunications incumbent in quality and in cost reduction when an entrant can use its network through unbundling of the local loop. We ?nd that unbundling may lower incentives for quality improvements, but raises incentives for cost reduction. Therefore, it is not true that all types of investment are crowded out with unbundling. If the regulator can commit to a socially optimal unbundling price before investment, the incumbent makes both types of investment. In the absence of commitment, the incumbent will not invest, so that unbundling regulation may lower welfare as compared to no regulation. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp526&r=reg |