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on Regulation |
| By: | Asheim, Geir B. (Dept. of Economics, University of Oslo) |
| Abstract: | Strategic use of environmental information may have as consequence that a benevolent environmental agency will choose not to disclose information leading to reduced moral motivation. Thus, decision makers will not have access to such information, implying that they will not be able to adjust their decisions to available information on the state of the environment. In contrast, if the benevolent environmental agency instead bases its regulation on standard economic instruments, these instruments will incorporate all available information. Keywords and Phrases: Environmental regulation, voluntary contributions, moral motivation, hard information. |
| Keywords: | environmental regulation; voluntary contributions; moral motivation; hard iformation |
| JEL: | D11 H41 |
| Date: | 2009–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2009_021&r=reg |
| By: | Celine Gauthier; Alfred Lehar; Moez Souissi |
| Abstract: | In the aftermath of the financial crisis, there is interest in reforming bank regulation such that capital requirements are more closely linked to a bank's contribution to the overall risk of the financial system. In our paper we compare alternative mechanisms for allocating the overall risk of a banking system to its member banks. Overall risk is estimated using a model that explicitly incorporates contagion externalities present in the financial system. We have access to a unique data set of the Canadian banking system, which includes individual banks' risk exposures as well as detailed information on interbank linkages including OTC derivatives. We find that systemic capital allocations can differ by as much as 50% from 2008Q2 capital levels and are not related in a simple way to bank size or individual bank default probability. Systemic capital allocation mechanisms reduce default probabilities of individual banks as well as the probability of a systemic crisis by about 25%. Our results suggest that financial stability can be enhanced substantially by implementing a systemic perspective on bank regulation. |
| Keywords: | Financial stability |
| JEL: | G21 C15 C81 E44 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:10-4&r=reg |
| By: | Ojo, Marianne |
| Abstract: | The primary argument of this paper is, namely, that the International Accounting Standards Board (IASB), is in need of an enforcement mechanism. In drawing attention to this argument, the paper not only proposes considerations which are to be taken into account if such a mechanism is to be implemented, but also considers areas in which the regulation of accounting standards, and auditing standards in particular, have contributed to the recent global financial crisis. The impact of such standards on pro cyclicality, the level of success achieved by the IASB and other international standard setters such as the Basel Committee on Banking Supervision, relates to how effectively the accounting and audit standard setting is implemented. As well as identifying the importance of convergence in contributing towards high quality audits and the consistent application of auditing and accounting standards, this paper also acknowledges the difficulties and challenges encountered in attempting to achieve a convergent framework. Furthermore, through a discussion of recommendations aimed at consolidating transparency and accounting, as proposed by the G20, ways in which accounting standards, and consequently the IASB, could contribute further to the improvement of transparency and accountability of the framework for fair value measurements and evaluation, are considered. The absence of enforcement mechanisms, the fact that enforcement actions are carried out at national level in various EU member states, present sources of obstacles to attempts to realise the proposals put forward by the G20. This paper not only attempts to address such factors, but also to suggest ways in which the IASB, to an extent, could realise its goals. Through a consideration of two enforcement regimes in Europe, namely, Germany and the UK, two related standards which govern enforcement in Europe, principles on which harmonisation of the institutional oversight systems in Europe may be achieved , and the vital contribution made by CESR and EFRAG (the European Financial Reporting Advisory Group), this paper will consider how enforcement could be implemented by the IASB at European level. |
| Keywords: | Audit; FASB; IASB; regulation; Financial Crisis; standards |
| JEL: | K2 G2 G3 M4 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20330&r=reg |
| By: | Jan Kregel |
| Abstract: | The purpose of the 1933 Banking Act--aka Glass-Steagall--was to prevent the exposure of commercial banks to the risks of investment banking and to ensure stability of the financial system. A proposed solution to the current financial crisis is to return to the basic tenets of this New Deal legislation. Senior Scholar Jan Kregel provides an in-depth account of the Act, including the premises leading up to its adoption, its influence on the design of the financial system, and the subsequent collapse of the Act's restrictions on securities trading (deregulation). He concludes that a return to the Act's simple structure and strict segregation between (regulated) commercial and (unregulated) investment banking is unwarranted in light of ongoing questions about the commercial banks' ability to compete with other financial institutions. Moreover, fundamental reform--the conflicting relationship between state and national charters and regulation--was bypassed by the Act. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levppb:ppb_107&r=reg |
| By: | Tulbure, Narcis; Catarama, Delia |
| Abstract: | This paper explores the institutional and socio-cultural factors explaining the differential development and growth rates of the mutual fund industry in a sample of 41 countries. It draws on multivariate OLS regressions. It shows that the development of mutual funds is influenced positively by regulatory quality and economic and financial system development, but it is negatively related to the presence of a Lamfalussy type regulatory framework (as in all member states of the European Union). Also, widespread belief in work as the legitimate source of monetary gain seems to be negatively associated with mutual fund development. The growth rates of national mutual fund industries are negatively related to general economic development. The negative coefficient of the variable coding for regulatory quality indicates that a poorer regulation of the field (when compared to the developed countries) does not necessarily inhibit growth, especially in the case of young industries. Lamfalussy regulations do not have any significant effect on mutual fund growth. At the same time, mutual fund industries have grown most rapidly in countries with high percentages of Muslim and Christina Orthodox believers. |
| Keywords: | mutual funds; the Lamfalussy process; quality of regulations; work and money; socio-cultural values; religion and finance |
| JEL: | O17 G38 G23 K22 Z13 |
| Date: | 2009–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20341&r=reg |
| By: | Rakesh Mohan; Muneesh Kapur (Asian Development Bank Institute) |
| Abstract: | Capital flows to emerging market economies (EMEs) have been characterized by high volatility since the 1980s. In recent years (especially since 2003), although gross as well as net capital flows to the EMEs have increased, they could not be absorbed domestically. Overall, savings have flowed uphill from EMEs to advanced economies, challenging the conventional view that capital flows to EMEs are always beneficial through augmentation of their resources leading to greater investment. Full capital account liberalization can impart avoidable volatility and have an adverse impact on growth prospects of EMEs. Available evidence is strongly in favor of a calibrated and well-sequenced approach to opening up the capital account and its active management, along with complementary reforms in other sectors. Greater caution is needed in the liberalization of debt flows. Despite much advice to the contrary, most EMEs manage their capital accounts actively to cushion their economies from undue volatility, including interventions in the foreign exchange markets accompanied by sterilization. Sound macroeconomic and financial policies―accompanied by prudent capital account management, greater exchange rate flexibility, purposive use of prudential regulation, and continued financial market development practiced by most Asian EMEs over the past decade―have cushioned their economies from the current global financial crisis that started in 2007. They have successfully achieved a virtuous circle of continuing growth, low and stable inflation, and financial stability. How these elements can be best combined will depend on the country and on the period: There is no “one size fits all.†Such a discretionary approach does put a great premium on the skill of policymakers and can run the risk of markets perceiving central bank actions becoming uncomfortably unpredictable. Such risk is mitigated by a record of successful management. |
| Keywords: | Emerging Market Economies, Liberalization, Regulation, Capital Flows |
| JEL: | E42 E44 E52 E58 F3 F4 G15 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:2024&r=reg |
| By: | Sheri Markose; Simone Giansante; Mateusz Gatkowski; Ali Rais Shaghaghi |
| Abstract: | Credit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks’ assets has led to the idea of “too interconnected to fail” resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92% of the US bank activity in the $34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued. |
| Date: | 2010–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:683&r=reg |
| By: | Cottini, Elena (University of Milan); Lucifora, Claudio (Università Cattolica del Sacro Cuore) |
| Abstract: | Increased pressure for labour market flexibility and increasing demand over workers' performance have fostered the idea that working conditions, in most European countries, have progressively deteriorated with adverse effects on psychological well being and mental health. This paper investigates the links between contractual arrangements, working conditions and mental health using time-series cross-section data for 15 European countries. We use different waves of the European Working Conditions Survey (1995, 2000, 2005) to document recent patterns in mental health at the workplace and to assess how these are related to various job attributes. We find substantial heterogeneity in mental health incidence at the workplace both across workers, as well as between countries. Given population heterogeneity in responses to mental health questions, we implement a methodology for differential reporting in ordered response models which allows for threshold shifts. We show that a set of workplace attributes, such as: working in shifts, performing complex and intensive tasks and having restricted job autonomy lead to a higher probability of reporting mental health problems. We also provide evidence of a positive causal effect of adverse overall working conditions on mental health distress. We show that labour market institutions, and health and safety regulations can explain a significant part of cross-country differences. |
| Keywords: | working conditions, mental health, health and safety regulation, labour market institutions |
| JEL: | C25 I10 J81 J28 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4717&r=reg |
| By: | Metin M. Cosgel (University of Connecticut); Haggay Etkes (Bank of Israel); Thomas J. Miceli (University of Connecticut) |
| Abstract: | This paper contributes to the literature on private law enforcement by proposing a novel solution to the problem of underenforcement by monopolistic enforcers. Monopolistic enforcers underinvest in fine collection because, by maximizing net expected revenue, they ignore the social benefits of deterrence. We show that this problem can be partially resolved by combining the tasks of law enforcement with tax collection because a joint enforcer-collector will have an interest in reducing the crime rate in order to maximize his income from taxes. In support of the theory, we discuss two historical examples of this practice: decentralized law enforcement under European feudalism, and centralized law enforcement in the Ottoman Empire. |
| Keywords: | Criminal fines, deterrence, private law enforcement, tax collection |
| JEL: | H11 K42 N40 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2010-03&r=reg |
| By: | Whelan, Karl |
| Abstract: | Systemic risk refers to the risk of financial system breakdown due to linkages between institutions. This risk cannot be assessed by looking at how individual institutions manage risks but instead requires a full understanding of how the system as a whole operates. At present, the data available to central banks and financial regulators are not at all adequate for the task of assessing systemic risk and the new European Systemic Risk Board needs to address this issue. There is a lot of exciting ongoing research devoted to measuring systemic risk and providing signals to regulators as to when and where they should intervene. However, the tools being developed are still limited in their usefulness. Perhaps more pressing than the development of these tools is the implementation of policy measures to make the financial system more robust. These measures should include higher capital ratios, limits on non-core funding and redesigning financial systems to be less complex. |
| Keywords: | Financial institutions--Management; Risk--Europe; Financial institutions--Law and legislation--Europe; Financial crises--Prevention; |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucddub:urn:hdl:10197/1672&r=reg |
| By: | Salvatori, Andrea (ISER, University of Essex) |
| Abstract: | All industrialized countries have Employment Protection Legislation (EPL) for permanent workers and Restrictions on the use of Temporary Employment (RTE). The (ambiguous) effects of these on the levels of employment and unemployment have been extensively studied, but nothing is known empirically about their well-being implications. Using longitudinal data from the European Community Household Panel, the author conducts the first study of the link between both EPL and RTE and workers' wellbeing. The results provide evidence that both permanent and temporary employees gain from reforms that ease restrictions on temporary employment but leave firing costs for permanent workers unchanged. This finding contrasts with common claims found in the political economy literature. |
| Keywords: | temporary employment, employment protection legislation, job satisfaction |
| JEL: | J28 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4685&r=reg |
| By: | Holden, Steinar (Dept. of Economics, University of Oslo); Rosén, Åsa (Stockholm University (SOFI)) |
| Abstract: | We study a search model with employment protection legislation. We show that if the output from the match is uncertain ex ante, there may exist a discriminatory equilibrium where workers with the same productive characteristics are subject to different hiring standards. If a bad match takes place, discriminated workers will use longer time to find another job, prolonging the costly period for the firm. This makes it less profitable for the firms to hire the discriminated workers, thus sustaining discrimination. In contrast to standard models, the existence of employers with a taste for discrimination may make it more profitable to discriminate also for firms without discriminatory preferences. |
| Keywords: | Discrimination; Employment Protection; Hiring Standards |
| JEL: | J60 J70 |
| Date: | 2009–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2009_022&r=reg |
| By: | Bulow, Jeremy; Klemperer, Paul |
| Abstract: | Fixing the banks is an absolute priority in G7 nations. Doing this by buying toxic assets is costly, inefficient, and risky. Governments should focus on which liabilities, rather than which assets, they need to support. This column proposes creating “bridge†banks as a way of re-establishing a healthy banking system. |
| Date: | 2009–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:ner:oxford:http://economics.ouls.ox.ac.uk/14324/&r=reg |
| By: | Charles L. Baum II |
| Abstract: | With over 66 % of Americans overweight, expectant mothers are unusual because they are encouraged to gain weight while pregnant. Food stamp receipt (FSR) may facilitate recommended weight gain for pregnant women by providing additional resources for food and nutrition. I examine the effects of FSR on the amount of weight gained by low-income expectant mothers using NLSY79 data. Results indicate FSR decreases the probability gaining an insufficient amount of weight but does not exacerbate the probability of gaining too much weight. Examining the effects of FSR on pregnancy weight gain is important because low birth weight is more likely when expectant mothers gain an insufficient amount of weight. |
| Keywords: | Food stamps, weight, weight gain |
| JEL: | J1 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:mts:wpaper:201002&r=reg |