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on Regulation |
| By: | Tatom, John |
| Abstract: | Financial sector regulatory reform has been a leading national issue since the U.S. Treasury issued its Blueprint for reform in spring (2008). The mortgage foreclosure and financial crises reinforced popular interest in whether the U.S. regulatory framework was deficient and how to fix the regulatory framework. Meanwhile, some key decisions in the United States, particularly concerning the failure and bailout of AIG and some investment banks in fall 2008, have established precedents for a new regulatory framework and policies. Where policymakers go from here is not certain, but the ideas on the table and the direction of policy suggest that the role of the Federal Reserve (Fed) in financial regulation will become central, at least in critical periods. This paper reviews the calls for a new “financial stability” regulator and the potential role of the Fed as such a regulator. It argues that the takeover of AIG provides a useful example and precursor of the Fed’s suitability in that role. Section 1 explains the Fed’s role as regulator and the relationship of the Fed’s lender of last resort function to systemic risk. It also addresses recent changes in the notion of systemic risk and systemically significant firms in concluding that there is a remaining case for a new regulator of such risk. Section II reviews the financial problems of AIG and the changing intervention of the Fed and the U.S. Treasury in AIG. The last section takes up some related issues, the role of a central bank versus a Financial Stability Authority in regulating banks or systemic risk, the potential role of the Fed or a another federal regulator in regulating the insurance industry and the risk to Fed independence from extending its regulatory role to cover systemic risk. The Fed’s actions with regard to AIG provide strong evidence that broadening the too big to fail policy or broadening the Fed’s lender of last resort policy to include non-bank firms pose strong conflicts for the achievement of the objectives of monetary policy or of financial stability. Moreover, the loss experience of AIG indicates the problems of fragmented or absent federal regulation of insurers for regulatory reform. |
| Keywords: | Financial Regulation; Central Banking; Systemic Risk; |
| JEL: | E58 G28 |
| Date: | 2009–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14122&r=reg |
| By: | Carsten Hefeker (University of Siegen, Department of Economics, Hoelderlinstrasse 3, 57068 Siegen, Germany); Michael Neugart (Free University of Bozen/Bolzano, School of Economics and Management, Sernesistrasse 1, I-39100 Bozen, Italy) |
| Abstract: | When enacting labor market regulation governments face courts that interpret and implement the legal code. We show that the incentives for governments for labor market reform increase with the uncertainty that is involved in the implementation of legal codes through courts. Given that judges have more discretion in common as opposed to civil law systems more reform activity as a response to crises should be observed in the former system. This finding is backed by evidence from a panel of OECD countries. |
| Keywords: | labor market regulation, labor courts, uncertainty, unemployment |
| JEL: | D78 K31 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200915&r=reg |
| By: | John P. Harding (University of Connecticut); Xiaozhong Liang (State Street Corporation); Stephen L. Ross (University of Connecticut) |
| Abstract: | This paper studies the impact of capital requirements, deposit insurance and tax benefits on a bank's capital structure. We find that properly regulated banks voluntarily choose to maintain capital in excess of the minimum required. Central to this decision is both tax advantaged debt (a source of firm franchise value) and the ability of regulators to place banks in receivership stripping equity holders of firm value. These features of our model help explain both the capital structure of the large mortgage Government Sponsored Enterprises and the recent increase in risk taking through leverage by financial institutions. |
| Keywords: | Banks, Capital Structure, Capital Regulation, Financial Intermediation, Leverage, GSE, Investment Banks |
| JEL: | G21 G28 G32 G38 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2009-09&r=reg |
| By: | Samà, Danilo |
| Abstract: | The present assessment focuses the attention on the antitrust action in detecting and fighting oligopolistic collusion, analyzing the development of the innovative and modern leniency policy. Following the examination of the main conditions and reasons for cartel stability and sustainability, our attempt is to comprehend under which circumstances leniency program represents a functional and successful tool for preventing the formation of anti-competitive agreements. The problem statement that follows is therefore: how can Law&Economics approach help competition authorities to achieve and realize this form of enforcement? |
| Keywords: | Antitrust Cartels Enforcement Game Theory Leniency Program Oligopolistic Markets |
| JEL: | L5 L16 C7 K21 L1 |
| Date: | 2008–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14104&r=reg |
| By: | Timilsina, Govinda R.; Dulal, Hari B. |
| Abstract: | This study reviews regulatory instruments designed to reduce environmental externalities from the transport sector. The study finds that the main regulatory instruments used in practice are fuel economy standards, vehicle emission standards, and fuel quality standards. Although industrialized countries have introduced all three standards with strong enforcement mechanisms, most developing countries have yet to introduce fuel economy standards. The emission standards introduced by many developing countries to control local air pollutants follow either the European Union or United States standards. Fuel quality standards, particularly for gasoline and diesel, have been introduced in many countries mandating 2 to 10 percent blending of biofuels, 10 to 50 times reduction of sulfur from 1996 levels, and banning lead contents. Although inspection and maintenance programs are in place in both industrialized and developing countries to enforce regulatory standards, these programs have faced several challenges in developing countries due to a lack of resources. The study also highlights several factors affecting the selection of regulatory instruments, such as countries'environmental priorities and institutional capacities. |
| Keywords: | Transport Economics Policy&Planning,Transport and Environment,Energy Production and Transportation,Environmental Economics&Policies,Environment and Energy Efficiency |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4867&r=reg |
| By: | Juan Angel Jiménez Martín (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales. Dpto. de Fundamentos de Análisis Económico II.); Michael McAleer (Department of Quantitative Economics Complutense University of Madrid and Econometric Institute Erasmus University Rotterdam); Teodosio Pérez-Amaral (Department of Quantitative Economics Complutense University of Madrid) |
| Abstract: | Under the Basel II Accord, banks and other Authorized Deposit-taking Institutions (ADIs) have to communicate their daily risk estimates to the monetary authorities at the beginning of the trading day, using a variety of Value-at-Risk (VaR) models to measure risk. Sometimes the risk estimates communicated using these models are too high, thereby leading to large capital requirements and high capital costs. At other times, the risk estimates are too low, leading to excessive violations, so that realised losses are above the estimated risk. In this paper we propose a learning strategy that complements existing methods for calculating VaR and lowers daily capital requirements, while restricting the number of endogenous violations within the Basel II Accord penalty limits. We suggest a decision rule that responds to violations in a discrete and instantaneous manner, while adapting more slowly in periods of no violations. We apply the proposed strategy to Standard & Poor’s 500 Index and show there can be substantial savings in daily capital charges, while restricting the number of violations to within the Basel II penalty limits. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ucm:doicae:0907&r=reg |
| By: | Marie-Laure Allain (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Claire Chambolle (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, INRA - LORIA) |
| Abstract: | We show that resale-below-cost laws enable producers to impose industry-wide price-floors to retailers. This mechanism suppresses downstream competition but also and more surprisingly dampens upstream competition, leading to higher prices and lower welfare. Price-floor may be more profitable for producers than resale price maintenance contracts and, when a resale price maintenance restraint may have ambiguous effect on welfare, price-floors are always welfare damaging. Retailers' buyer power appears as a key for a price-floor to work out. |
| Keywords: | Price-floor, Resale Price Maintenance, Buyer Power, Competition |
| Date: | 2009–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00367492_v1&r=reg |
| By: | Andrew G. Brown (Wellfleet, MA); Robert M. Stern (University of Michigan, Ann Arbor) |
| Abstract: | We first discuss what fairness may mean in the context of the dispute settlement process, noting the crucial relation between fairness in dispute settlement and the functioning of the trading system as a whole. We explore this relation further through an analysis of three main groups of dispute settlement cases. These are: cases that turn around the question of defining fair competition; cases that arise from the use of contingency measures; and cases that draw the boundaries between domestic regulatory measures and the trade-related norms and rules of the WTO. There follows an analysis of experience with compliance and with the use of counter measures in various cases. Finally, taking together the rulings of the Dispute Settlement Body and the procedures for compliance and the use of counter measures, we conclude that while the present dispute settlement process serves to protect the fairness of the trading system as a whole, there are some aspects of dispute settlement that remain problematic from the standpoint of fairness. |
| Keywords: | disputes, resolution, trade, exports |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:577&r=reg |
| By: | Philip Keitel |
| Abstract: | This paper discusses consumer protections available to gift-card users. Specifically, it examines the ways in which value loaded at the time of purchase is protected for future card use or returned to consumers when the card is not used or has expired. The consumer protection information included in this paper is derived from a number of sources, including several types of state statutes, Federal Trade Commission decisions, financial industry regulatory agency guidelines, and previous interviews with payments industry experts regarding practices concerning network-branded gift cards. This paper expands research begun by the Payment Cards Center in 2004 into prepaid cards generally and the protections available to consumers who use gift cards specifically. |
| Keywords: | Payment systems |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpdp:08-07&r=reg |
| By: | Pierre Biscourp (ENSAE); Xavier Boutin (INSEE (D3E-MSE) and CREST-LEI); Thibaud Vergé (CREST-LEI) |
| Abstract: | In 1997, a new legislation banning below-invoice retail prices came into force in France. Individually negotiated discounts could no longer be passed on to consumers, which is equivalent to allowing industry-wide price floors. The anti-competitive effects of such practices are well-known. The elimination of intra-brand competition is expected to lead to a sharp increase in the retail prices. Using CPI raw data, we find evidence supporting this claim. The modification or revocation of the existing legislation (as it has been done in Ireland in December 2005) would then be expected to reduce retail prices. |
| Keywords: | retail prices, pricing regulations, resale price maintenance |
| JEL: | L42 L81 K23 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:2008-02&r=reg |