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on Regulation |
| By: | Ahrend, Rudiger; Arnold, Jens; Murtin, Fabrice |
| Abstract: | We assess whether during the recent financial crisis banking systems in countries with more stringent prudential banking regulation have proved more stable. We find indicators of regulatory strength to be relatively well correlated with the extent to which countries have escaped damage during the recent crisis, as measured either by the degree of equity value destruction in the banking sector or by the fiscal cost of financial sector rescue. |
| Keywords: | Prudential regulation; banking; stability; financial crisis; crisis cost; banking sector bail-out; banking share prices. |
| JEL: | G28 G21 |
| Date: | 2009–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20135&r=reg |
| By: | Carlos Chávez (Departamento de Economía, Universidad de Concepción); Mauricio Villena (Escuela de Negocios, Universidad Adolfo Ibáñez); Johan Stranlund |
| Abstract: | We analyze the cost of enforcing a system of firm specific emissions standards vis a vis a transferable emissions permit system in the context of complete and incomplete information. We also examine the optimality of a transferable emissions permit system when abatement costs and enforcement costs are considered. We show that under incomplete information, regulation based on each firm-specific emissions standards cannot be less costly than a transferable emissions permit system. In addition, we found that the distribution of emissions that minimize aggregate program costs differ from the distribution of emissions generated by a competitive transferable emissions permit system. |
| Keywords: | Environmental policy, cost-effectiveness, enforcement costs, incomplete information. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:cnc:wpaper:01-2009&r=reg |
| By: | Miguel Angel Quiroga (Departamento de Economía, Universidad de Concepción); Martin Persson (Department of Energy and Environment Chalmers University of Technology Sweden); Thomas Sterner (Department of Economics, Göteborg University) |
| Abstract: | We study whether lax environmental regulations induce comparative advantages, causing the least-regulated countries to specialize in polluting industries. We seek to improve three areas in the empirical literature based on the Heckscher-Ohlin-Vanek’s factor content of trade, more specifically in Tobey’s (1990) approach: the measurement of environmental endowments, the possible endogeneity due to an omitted variable that has not been considered, and the influence of the industrial level of aggregation. For the econometrical analysis, we use a cross-section of 71 countries to examine the net exports in the most polluting industries in the year 2000. As a result, we find that industrial aggregation matters and we find some evidence in favor of the pollution-haven effect. |
| Keywords: | trade, comparative advantage, pollution haven, environmental endowment,environmental regulation, Porter hypothesis, factor content, aggregation bias, nonhomothetic preferences. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:cnc:wpaper:03-2009&r=reg |
| By: | Köhler, Matthias |
| Abstract: | There is ample anecdotal evidence that political influence constitutes a barrier to the integration of the EU banking market. Based on a dataset on the transparency on the supervisory review process of bank mergers in the EU, I estimate the probability that a bank is taken over as a function of bank and country characteristics and the transparency of merger control. The results indicate that banks are systematically more likely to be taken over by foreign credit institutions if the regulatory process is transparent. Particularly large banks seem to be less likely to be taken over by foreign banks if merger control lacks transparency. -- |
| Keywords: | Mergers and acquisitions,banks,barriers to consolidation,political interference |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:08009r&r=reg |
| By: | Zhang, Longmei |
| Abstract: | This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model to study how the instability of the banking sector can amplify and propagate business cycles. The model builds on Bernanke, Gertler and Gilchrist (BGG) (1999), who consider credit demand friction due to agency cost, but it deviates from BGG in that financial intermediaries have to share aggregate risk with entrepreneurs, and therefore bear uncertainty in their loan portfolios. Unexpected aggregate shocks will drive loan default rate away from expected, and have an impact on both firm and bank's balance sheet via the financial contract. Low bank capital position can create strong credit supply contraction, and have a significant effect on business cycle dynamics. -- |
| Keywords: | Bank capital regulation,banking instability,financial friction,business cycle |
| JEL: | E32 E44 E52 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:200933&r=reg |
| By: | Schou-Zibell, Lotte (Asian Development Bank); Madhur, Srinivasa (Asian Development Bank) |
| Abstract: | The determinants of a business friendly environment that underpin rapid and sustained economic growth include the macroeconomic and financial market environments, infrastructure, labor market skills and efficiency, and governance and institutions. Obtaining licenses and credit to start a business, finding and managing labor, ensuring investor protection, enforcing contracts, paying taxes, trading across borders, and identifying the requirements for closing a business are all important factors in assessing the operating climate for doing business. By comparative benchmarking, this paper examines these determinants in six developing Asian economies—the People’s Republic of China, Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam—and compares them with similar indicators for five benchmark economies—the newly industrialized economies (NIEs) of Hong Kong, China; the Republic of Korea; and Singapore; and the developed economies of Japan and the United States. <p> This paper also identifies areas where reform has taken place and where further efforts are needed, such as addressing policy uncertainties, the quality of governance and legal and institutional frameworks, and inadequate regulatory capacity. Attending to these shortcomings will require policymakers to implement structural reforms that improve efficiency and competitiveness by (i) minimizing unnecessary regulatory barriers in business activities, (ii) encouraging private incentives and market discipline, (iii) creating a level playing field across all sectors, and (iv) fostering competition to upgrade institutional capacity. This paper argues that the regular monitoring of relevant indicators and comparative benchmarking can (i) provide important incentive structures that encourage the sharing and implementation of good practices through peer pressure mechanisms and (ii) serve as a starting point for dialogue between government and the private sector on reform priorities that can improve the business environment. |
| Keywords: | Business environment; investment; Asia; benchmarking |
| JEL: | D21 D73 F21 K40 O57 |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbrei:0040&r=reg |
| By: | Giofré, Maela/M. |
| Abstract: | This paper investigates the impact of investor protection legislation on foreign shareholders and bondholders. We find, not surprisingly, a positive "direct" effect of investor protection laws: foreign stock and bond investments are encouraged by legislation that better protects, respectively, shareholder and creditor rights. However, different investor classes are endowed with different rights, and conflicting interests among them can make strong protections afforded to one party detrimental to another. Indeed, we find that investor protection laws have significant and sizeable "cross" effects on foreign portfolio investment and that the direction of these effects is fully consistent with the conjecture that foreign stakeholders are relatively more sensitive to the perceived riskiness of assets than domestic investors. Specifically, we find that strong protection of creditor rights -- limiting excessive risk taking -- positively affects foreign shareholders, whereas strong protection of shareholder rights -- potentially shifting a firm toward riskier projects -- has a negative impact on foreign bondholders. The immediate policy implication of our findings is that strengthening investor protection rights is not a universally desirable policy. More specifically, accounting for the interaction of conflicting corporate governance mechanisms is critical to the design of regulatory policies and strategies aimed toward enhancement of inward foreign investment. |
| Keywords: | International portfolio investments; Investor Protection; Bondholders-shareholders conflicts |
| JEL: | G11 G15 G30 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20238&r=reg |
| By: | Dean Baker; Travis McArthur |
| Abstract: | One outcome of the TARP and other bank rescue efforts following the collapse of Lehman Brothers in September of 2008 is that the United States has essentially formalized a commitment to a “too big to fail” (TBTF) policy for major banks. This paper uses data from the FDIC on the relative cost of funds for TBTF banks and other banks, before and after the crisis, to quantify the value of the government protection provided by the TBTF policy. |
| Keywords: | Federal Reserve, Treasury, banks |
| JEL: | G G2 G21 G24 G28 H H2 H25 E E5 E58 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2009-36&r=reg |
| By: | Xin Huang; Hao Zhou; Haibin Zhu |
| Abstract: | This paper extends the approach of measuring and stress-testing the systemic risk of a banking sector in Huang, Zhou, and Zhu (2009) to identifying various sources of financial instability and to allocating systemic risk to individual financial institutions. The systemic risk measure, defined as the insurance cost to protect against distressed losses in a banking system, is a summary indicator of market perceived risk that reflects expected default risk of individual banks, risk premia as well as correlated defaults. An application of our methodology to a portfolio of twenty-two major banks in Asia and the Pacific illustrates the dynamics of the spillover effects of the global financial crisis to the region. The increase in the perceived systemic risk, particularly after the failure of Lehman Brothers, was mainly driven by the heightened risk aversion and the squeezed liquidity. Further analysis, which is based on our proposed approach to quantifying the marginal contribution of individual banks to the systemic risk, suggests that “too-big-to-fail” is a valid concern from a macroprudential perspective of bank regulation. |
| Keywords: | systemic risk, Macroprudential regulation, Portfolio distress loss, Credit default swap, Dynamic conditional correlation |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:296&r=reg |
| By: | Clifford Winston |
| Abstract: | The purpose of this paper is to suggest how the U.S. experience with deregulating its intercity transportation system can identify important considerations for all countries that wish to pursue privatization. Transportation deregulation in the United States gave private railroad, trucking, bus, and airline companies the freedom to set prices, choose which markets to serve, and what level of service to provide. Because U.S. firms were saddled with inefficiencies that developed over decades of regulation, their adjustment to deregulation has been difficult and time consuming. Nonetheless, deregulation has succeeded to a notable extent in the short run and could provide even greater benefits in the long run. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaaa:2009/20-en&r=reg |
| By: | Hüschelrath, Kai; Weigand, Jürgen |
| Abstract: | The paper develops a framework to enforce anti-predation rules that explicitly takes the intervention stage into account. In particular, it is proposed to improve predation enforcement by focusing on two channels: refining the current regime, and amending it. With respect to the refinement of the current predation enforcement regime, criteria for the imposition of optimal gain- or harm-based fines are derived in order to sharpen the deterrent effect of predation enforcement. However, given the very low probability of conviction for predators a policy proposal solely based on an increase in the fines for detected and convicted predators might be too weak to significantly amplify the deterrence effect in particular and to improve predation enforcement in general. As a consequence, the introduction of a pre-screening approach is proposed, which aims at identifying industries in which entry is difficult but desirable and a predation strategy might be a suitable instrument for an incumbent to fight such occasional entry attempts. In those industries, it is advisable to reduce the high standard of proof in predation enforcement, as its basic justification - the danger to create a negative deterrence effect - is significantly reduced. -- |
| Keywords: | Competition policy,monopolisation,predation,enforcement,sanctions,screening |
| JEL: | K21 L41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:09085&r=reg |
| By: | Köhler, Matthias |
| Abstract: | In 2005, the President of the Bank of Italy blocked the cross-border acquisition of two Italian banks for prudential reasons and formal errors. Because it became later public that both deals were not blocked for prudential reasons, but to protect domestic banks from foreign investors. A survey of the EU Commission indicates that the misuse of supervisory powers and political interference is not only a barrier to cross-border consolidation in Italy, but in other EU countries as well. Systematic empirical evidence on the role of merger control as barrier to M&A is, however, still missing. The main problem is the lack of data on the scope for politicians and supervisors to block M&A during merger control. The main contribution of this paper is to collect this data and to construct indices on the political independence of the supervisory authorities and the transparency of merger control. The main source of information is a questionnaire that was sent to the supervisors in the 25 EU member countries between October 2006 and March 2007. -- |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:07082r&r=reg |
| By: | Chen Zhou |
| Abstract: | Abstract We consider three measures on the systemic importance of a financial institu- tion within a interconnected financial system. Based on the measures, we study the relation between the size of a financial institution and its systemic importance. From both theo- retical model and empirical analysis, we find that in analyzing the systemic risk posed by one financial institution to the system, size should not be considered as a proxy of systemic importance. In other words, the "too big to fail" argument is not always valid, and alter- native measures on systemic importance should be considered. We provide the estimation methodology of systemic importance measures under the multivariate Extreme Value Theory (EVT) framework. |
| Keywords: | Too big to fail; systemic risk; systemic importance; multivariate extreme value theory. |
| JEL: | F3 G11 G15 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:232&r=reg |
| By: | Samir R Gandhi |
| Abstract: | Whether the WTO dispute settlement mechanism offers India an effective remedy against the misuse of NGO Standards or does India needs to adopt an alternate strategy to address such concerns is evaluated. The paper argues that an amendment to the text of the TBT Agreement is perhaps the most effective way regulating the growth of NGO Standards and for removing any ambiguity in or misinterpretation by the dispute settlement mechanism. In addition, India could push for a more ambitious work agenda at the CTE within the ongoing Doha Round negotiations. [ICRIER WP No. 181]. |
| Keywords: | ENVIRONMENTAL standards, non-profit, amendment, industry, manufacturers, privatization, NGO, green consumerism, negotiations, NGO, India, protection, Doha round, negotiations, WTO, Indian, voluntary, trade report, technological innovations, standardization, social issues, global commerce, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2377&r=reg |