nep-reg New Economics Papers
on Regulation
Issue of 2009‒12‒05
ten papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. International Trade and Domestic Regulation By Robert W. Staiger; Alan O. Sykes
  2. Infrastructure and project financing in Italy: the (possible) role of the regulation By Cristina Giorgiantonio; Valentina Giovanniello
  3. On the Dynamics of Competing Energy Sources By Tsur, Yacov; Zemel, Amos
  4. Endogenous choice of bank liquidity: the role of fire sales By Acharya, Viral; Song Shin, Hyun; Yorulmazer, Tanju
  5. Selective contracting and foreclosure in health care markets By Bijlsma, Michiel; Boone, Jan; Zwart, Gijsbert
  6. Dynamic provisioning: rationale, functioning, and prudential treatment By Marco Burroni; Mario Quagliariello; Emiliano Sabatini; Vincenzo Tola
  7. The Determinants of State-Level Antitrust Enforcement By Robert M. Feinberg; Kara M. Reynolds
  8. Fundraising and optimal policy rules By Mungan, Murat; Baris, Yoruk
  9. The Doha Round and Market Access for LDCs: Scenarios for the EU and US Markets By Céline CARRERE; Jaime MELO DE
  10. The heavenly liquidity twin : the increasing importance of liquidity risk By Montes-Negret, Fernando

  1. By: Robert W. Staiger; Alan O. Sykes
    Abstract: Existing formal models of the relationship between trade policy and regulatory policy suggest the potential for a regulatory race to the bottom. WTO rules and disputes, however, center on complaints about excessively stringent regulations. This paper bridges the gap between the existing formal literature and the actual pattern of rules and disputes. Employing the terms-of-trade framework for the modeling of trade agreements, we show how "large" nations may have an incentive to impose discriminatory product standards against imported goods once border instruments are constrained, and how inefficiently stringent standards may emerge under certain circumstances even if regulatory discrimination is prohibited. We then assess the WTO legal framework in light of our results, arguing that it does a reasonably thorough job of policing regulatory discrimination, but that it does relatively little to address excessive nondiscriminatory regulations.
    JEL: F13 K33
    Date: 2009–11
  2. By: Cristina Giorgiantonio (Bank of Italy); Valentina Giovanniello (Bank of Italy)
    Abstract: There has been a significant increase in project financing in the public sector in Europe in the past decade, benefiting the implementation of infrastructure projects. In Italy, project financing is still much more limited than in such countries as Spain and the UK: the projects funded are smaller and the sectors involved are less appropriate. Based on the economic literature, European initiatives and international comparisons, the paper examines the aspects of the regulations that could encourage the appropriate use of project financing and considers the problems with the Italian regulations, proposing some corrective measures. The main limitations involve: i) uncertainties over the allocation of administrative and regulatory risks; ii) poor procedures for selecting the private contractors; iii) relative lack of attention to the contract terms; and iv) inadequate safeguards to ensure the bankability of the projects.
    Keywords: infrastructure financing, project financing, regulation, risk allocation
    JEL: K23 L51 L90
    Date: 2009–11
  3. By: Tsur, Yacov; Zemel, Amos
    Keywords: fossil and solar energy, optimal processes, characteristic curves, price thresholds, environmental regulation., Resource /Energy Economics and Policy,
    Date: 2009–10
  4. By: Acharya, Viral (London Business School); Song Shin, Hyun (Princeton University Bendheim Center for Finance); Yorulmazer, Tanju (Federal Reserve Bank of New York)
    Abstract: Banks’ liquidity is a crucial determinant of the adversity of banking crises. In this paper, we consider the effect of fire sales and entry during crises on banks’ ex-ante choice of liquid asset holdings. We consider a setting with limited pledgeability of risky cash flows relative to safe ones and a differential expertise between banks and outsiders in employing banking assets. When a large number of banks fail, market for assets clears only at fire-sale prices and outsiders enter the market if prices fall sufficiently low. In such states, there is a private benefit of liquid holdings to banks from purchasing assets. There is also a social benefit since greater banking system liquidity reduces inefficiency from liquidation of assets to outsiders. When pledgeability of risky cash flows is high, for instance, in countries with well-developed capital markets, banks hold less liquidity than is socially optimal due to risk-shifting incentives; otherwise, banks may hold even more liquidity than is socially optimal to capitalise on fire sales. However, if there is a systemic cost associated with crises, for example, in the form of fiscal costs associated with provision of deposit insurance, then socially optimal liquidity may always be higher than the privately optimal one, and, in turn, regulation in the form of prudent liquidity requirements may be desirable. We provide some international evidence on banks’ liquid holdings that is consistent with model’s predictions.
    Keywords: Crises; systemic risk; distress; limited pledgeability; lender of last resort
    JEL: D61 E58 G21 G28 G32
    Date: 2009–11–27
  5. By: Bijlsma, Michiel; Boone, Jan; Zwart, Gijsbert
    Abstract: We analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains active in the market for the non-insured, we show that exclusion leads to anti-competitive effects on this non-insured market. As a consequence exclusion can raise industry profits, and then occurs in equilibrium. Under competitive insurance markets, the anticompetitive exclusive equilibrium survives. Uninsured consumers, however, are now not better off without exclusion. Competition among insurers raises prices in equilibria without exclusion, as a result of a horizontal analogue to the double marginalization effect. Instead, under competitive insurance markets exclusion is desirable as long as no provider is excluded by all insurers.
    Keywords: anti-competitive effects; exclusion; foreclosure; health insurance; selective contracting; uninsured
    JEL: G22 I11 L42
    Date: 2009–11
  6. By: Marco Burroni (Banca d'Italia); Mario Quagliariello (Banca d'Italia); Emiliano Sabatini (Banca d'Italia); Vincenzo Tola (Banca d'Italia)
    Abstract: Current policy debate has renewed interest in countercyclical provisioning policies; dynamic provisions are regarded as a valuable device for pursuing this goal. Last July, Ecofin supported “the introduction of forward-looking provisioning, which consists in constituting provisions deducted from profits in good times for expected losses on loan portfolios, and which would contribute to limiting procyclicalityâ€. This paper describes: i) how dynamic provisions work in a general framework based on expected losses; ii) how they work according to the Spanish system, which is the only real example of countercyclical provisioning; iii) the differences and similarities between the expected loss model and the Spanish approach. Building on proposals currently under discussion in the international community, it also suggests a possible way forward for introducing a system of dynamic provisions that, while meeting the prudential goal of having more conservative provisioning policies, would not clash with accounting standards.
    Keywords: dynamic provisions, capital buffers, Basel 2, credit risk, procyclicality
    JEL: G21 G28
    Date: 2009–11
  7. By: Robert M. Feinberg; Kara M. Reynolds
    Abstract: While there has been a considerable literature exploring determinants of antitrust enforcement in the United States, studies have been based either on aggregate federal enforcement data over time (exploring cyclical influences) or cross-industry studies, usually for a single year or aggregated over several years. What has never been investigated is the pattern of state-level antitrust. This is somewhat surprising, as this has been a major activity of many state Attorneys General. In this paper, we explain state antitrust enforcement across states and time (for a 15-year period), examining a number of economic and political determinants which have been proposed in the literature.
    Keywords: antitrust enforcement
    JEL: L44
    Date: 2009–09
  8. By: Mungan, Murat; Baris, Yoruk
    Abstract: This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be sub-optimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with establishing charities are sufficiently low, then the optimal market structure is not a monopoly. Given the importance of the trade-off between the volume and variety of charitable services, we argue that this result may be of particular interest to policy makers.
    Keywords: fundraising; social planner; regulatory policy
    JEL: L38
    Date: 2009–11–29
  9. By: Céline CARRERE (Centre d'Etudes et de Recherches sur le Développement International); Jaime MELO DE (Université Genève)
    Abstract: It was a hope of LDCs that the DOHA round would bring them greater market access in OECD countries than for non-LDCs. Using HS-6 tariff level data for the US and the EU for 2004, this paper estimates that, once the erosion from preferential access into the EU to non-LDCs are taken into account, LDCs have about a 3% preferential margin in the EU market. In the US market, in spite of preferences under AGOA, on a trade-weighted basis, LDCs are discriminated against. Under various "Swiss formulas" for tariff cuts, effective market access for LDCs in the EU will be negligible and still negative in the US. If the US were to apply a 97% rule (i.e. duty-free, quota-free access for all but three percent of the tariff lines), LDCs could increase exports by 10% or about $1billion annually. Effective market access is further reduced by complicated Rules of Origin (RoO) applied by the EU and the US. Furthermore, generally, the most restrictive RoO fall on products in which LDCs have the greatest preferential market access.
    Keywords: LDCs, Rules of Origin, market access
    Date: 2009
  10. By: Montes-Negret, Fernando
    Abstract: Liquidity and solvency have been called the"heavenly twins"of banking (Goodhart, Charles,'Liquidity Risk Management', Financial Stability Review -- Special Issue on Liquidity, Banque de France, No. 11, February, 2008). Since these"twins"interact in complex ways, it is difficult -- particularly at times of crisis--to distinguish between them, especially in the presence of information asymmetries (Information asymmetry occurs when one party has more or better information than the other, creating an imbalance of power, giving rise to adverse selection and moral hazard ). An insolvent bank can be liquid or illiquid, and a solvent bank may be at times illiquid. In the latter case, insolvency is not far away, since banking is grounded in information and confidence, and it is confidence which in the end determines liquidity. In other words, liquidity is very much endogenous, determined by the general condition of a bank, as well as the perception of it by the public and market participants. Dealing with liquidity risk is more challenging than dealing with other risks, since liquidity is the result of all the operations of a bank and it is fundamentally a relative concept which compares segments of the balance sheet on the asset and liability sides. It does not deal with absolutes, like arguably the concept of capital and it explains why there is not an internationally recognized"Liquidity Accord". This Working Paper addresses key concepts like market and funding liquidity and basic tools to address liquidity issues like cash flows, liquidity gaps and some selected financial ratios. It aims at providing an introductory guide to risk assessment and management, and provides useful and practical guidelines to undertake liquidity assessments which could prove useful in preparing Financial Assessment Programs (FSAPS) in member countries of the Bretton Woods institutions.
    Keywords: Debt Markets,Banks&Banking Reform,Currencies and Exchange Rates,Emerging Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2009–11–01

This nep-reg issue is ©2009 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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