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on Regulation |
| By: | Xavier Freixas |
| Abstract: | The current crisis has swept aside not only the whole of the US investment banking industry but also the consensual perception of banking risks, contagion and their implication for banking regulation. As everyone agrees now, risks where mispriced, they accumulated in neuralgic points of the financial system, and where amplified by procyclical regulation as well as by the instability and fragility of financial institutions. The use of ratings as carved in stone and lack of adequate procedure to swiftly deal with systemic institutions bankruptcy (whether too-big-to-fail, too complex to fail or too-many to fail). The current paper will not deal with the description and analysis of the crisis, already covered in other contributions to this issue will address the critical choice regulatory authorities will face. In the future regulation has to change, but it is not clear that it will change in the right direction. This may occur if regulatory authorities, possibly influenced by public opinion and political pressure, adopt an incorrect view of financial crisis prevention and management. Indeed, there are two approaches to post-crisis regulation. One is the rare event approach, whereby financial crises will occur infrequently, but are inescapable. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1201&r=reg |
| By: | Valentina Bosetti (FEEM and CMCC, Italy. Visiting Fellow at Princeton Environmental Institute); David G. Victor (International Law & Regulation (ILAR) at UC San Diego, School of International Relations and Pacific Studies) |
| Abstract: | Modellers have examined a wide array of ideal-world scenarios for regulation of greenhouse gases. In this ideal world, all countries limit emissions from all economic sectors; regulations are implemented by intelligent, well-informed forward-looking agents; all abatement options, such as new energy technologies and forestry offsets, are available; trade in goods, services and emission credits is free and unfettered. Here we systematically explore more plausible second-best worlds. While analysts have given inordinate attention to which countries participate in regulation—what we call “variable geometry”—which has a strikingly small impact on total world cost of carbon regulations if international trade in emission credits allows economies to equilibrate. Limits on emission trading raise those costs, but by a much smaller amount than expected because even modest amounts of emission trading (less than 15% of abatement in a plausible scenario that varies the geometry of effort) have a large cost-reducing impact. Second best scenarios that see one sector regulated more aggressively and rapidly than others do not impose much extra burden when compared with optimal all-sector scenarios provided that regulations begin in the power sector. Indeed, some forms of trade regulation might decrease the financial flows associated to a carbon policy thus increasing political feasibility of the climate agreement. Much more important than variable geometry, trading and sectors is another factor that analysts have largely ignored: credibility. In the real world governments find it difficult to craft and implement credible international regulations and thus agents are unable to be so forward-looking as assumed in ideal-world modelling exercises. As credibility declines the cost of coordinated international regulation skyrockets—even in developing countries that are likely to delay their adoption of binding limits on emissions. Because international institutions such as treaties are usually weak, governments must rely on their own actions to boost regulatory credibility—for example, governments might “pre-commit” international regulations into domestic law before international negotiations are finally settled, thus boosting credibility. In our scenarios, China alone would be a net beneficiary of pre-commitment that advances its carbon limits two decades (from 2030, in our scenario, to today) if doing so would make international regulations more credible and thus encourage Chinese firms to invest with a clearer eye to the future. Overall, low credibility is up to 6 times more important in driving higher world costs for carbon regulations when compared with variable geometry, limits on emission trading and variable sectors. In this paper, we have not explored the other major dimension to the second-best: the lack of timely availability of the full range of abatement options, although our results suggest that even this will be less consequential than credibility. |
| Keywords: | Greenhouse Gases, Second-best Regulation |
| JEL: | Q5 Q58 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.29&r=reg |
| By: | Ashima Goyal |
| Abstract: | Stricter regulatory surveillance in emerging market economies (EMEs) largely insulated their financial systems from the crisis. Development and convergence of regulatory apparatus has been rapid. In some respects, EMEs may be closer to new global norms. The development of financial markets, however, is a major aim for regulation in EMEs along with financial stability. The success in achieving these objectives in the Indian case is examined. Some problems of regulatory overlap and coordination should be resolved keeping in mind the lessons of the crisis. |
| Keywords: | financial, emerging market economices, EMEs, firms, development, stability, technology, asymmetric, monopoly, imperfect informationmarket failures, incentives, procyclicality, coordination, rules versus principles, development, Indian, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2458&r=reg |
| By: | Harbord, David; Hoernig, Steffen |
| Abstract: | This paper presents results from a calibrated welfare model of the UK mobile telephony market which includes many mobile networks; calls to and from the fixed network; networkbased price discrimination; and call externalities. The analysis focuses on the short-run effects of adopting lower mobile termination rates (MTRs) on total welfare, consumer surplus and profits. Our simulations show that reducing MTRs broadly in line with the recent European Commission Recommendation to either “long-run incremental cost”; reciprocal termination charges with fixed networks; or “bill-and-keep” (i.e. zero termination rates), increases social welfare, consumer surplus and networks’ profits. Depending on the strength of call externalities, social welfare may increase by as much as £360 million to £2.5 billion per year. The analysis thus lends support to a move away from fully-allocated cost pricing and towards much lower MTRs, with bill-and-keep frequently leading to the highest increase in welfare when call externalities matter. We also apply the model to estimate the welfare effects of the recently-approved merger between Orange and T-Mobile under two different scenarios concerning MTRs. |
| Keywords: | telecommunications; regulation; mobile termination rates; network effects; welfare; simulations welfare; simulations |
| JEL: | L96 L51 L13 D43 |
| Date: | 2010–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:21515&r=reg |
| By: | Mathias Kifmann (University of Augsburg, Department of Economics) |
| Abstract: | This paper proposes a method to evaluate health technologies in a given therapeutic area. The key concept is a social health index which measures the performance of the health system. It considers both the level and the distribution of health in the population. If improvements in the social health index are valued with a social willingness to pay, it is possible to determine the optimal therapy for each therapeutic area. A maximum price can be assigned to medications which are more effective but more expensive. This price is higher, the lower the present health level in a therapeutic area. |
| Keywords: | economic evaluation, inequality in health, price regulation |
| JEL: | I18 D61 D63 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0310&r=reg |