|
on Regulation |
| By: | Naoaki Minamihashi |
| Abstract: | This paper finds that a regulation that promotes competition in one market may decrease competition in other related markets. Policy makers in the telecommunication industry currently are facing an important decision about whether to continue unbundling regulations on new optical-fiber lines. I find that unbundling regulation prevents new providers from building optical-fiber networks, by estimating a dynamic entry game with a dataset of fiber-optic network constructions in Japan from 2005 to 2009. In particular, when a new technology is introduced, unbundling regulation has an oligopolization effect on the regulated firms. This finding in the Japanese telecommunications industry suggests that unbundling regulation during periods of new technology diffusion may reduce the price of service but also decrease competition in the infrastructure market. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0804&r=reg |
| By: | Michael Breen (Dublin City University); Robert Gillanders (University College Dublin) |
| Abstract: | We analyze the effects of corruption and institutional quality on the quality of business regulation. Our key findings indicate that corruption negatively affects the quality of regulation and that general institutional quality is insignificant once corruption is con- trolled for. These findings hold over a number of specifications which include additional exogenous historical and geographic controls. The findings imply that policy-makers should focus on curbing corruption to improve regulation, over wider institutional re- form. |
| Keywords: | Business Regulation; Economic Policy; Institutional Quality; Corruption |
| Date: | 2011–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201106&r=reg |
| By: | Wolf-Peter Schill; Juan Rosellón; Jonas Egerer |
| Abstract: | We study the performance of different regulatory approaches for the expansion of electricity transmission networks in the light of realistic demand patterns and fluctuating wind power. In particular, we are interested in the relative performance of a combined merchant-regulatory mechanism compared to a cost-based and a merchant-like approach. In contrast to earlier research, we explicitly include both an hourly time resolution and fluctuating wind power, which allows representing demand in a very realistic way. This substantially increases the real-world applicability of results compared to previous analyses, which were based on simplifying assumptions. We show that a combined merchant-regulatory regulation, which draws on a cap over the two-part tariff of the Transco, leads to welfare outcomes far superior to the modeled alternatives. This result proves to be robust over a range of different cases and sensitivity analyses. We also find that the intertemporal rebalancing of the two-part tariff carried out by the Transco so as to expand the network is such that the fixed tariff part turns out to be relatively large compared to extension costs. |
| Keywords: | Electricity, Regulation, Transmission Expansion, Wind Power |
| JEL: | Q40 L51 D42 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1109&r=reg |
| By: | Christos Genakos; Tommaso Valletti |
| Abstract: | Interconnection rates are a key variable in telecommunications markets. Every call that is placed must be terminated by the network of the receiving party, thus the termination end has the characteristic of an economic bottleneck and is subject to regulation in many countries. This paper examines the impact of regulatory intervention to cut termination rates of calls to mobile phones. We argue that regulatory cuts should have a differential impact according to the type of tariff the mobile customer subscribes to. While all mobile customers may pay higher prices because of a "waterbed" effect, termination rates also affect competition among mobile operators. We show that the waterbed effect is diluted, but not eliminated, for customers with pre-paid cards, where regulation also acts as impediment to "raise-each-other's-cost" collusive strategies that mobile networks can adopt. The waterbed effect is instead strongest for consumers with monthly (post-paid) subscription contracts. |
| Keywords: | Interconnection, network competition, regulation, mobile phones |
| JEL: | L13 L51 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1045&r=reg |
| By: | Ambec, Stefan; Cohen, Mark A. (Resources for the Future); Elgie, Stewart; Lanoie, Paul |
| Abstract: | Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well-designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if profitable opportunities existed to reduce pollution, profit-maximizing firms would already be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (PH). Yet even today, we find conflicting evidence and alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights into the PH to date, draws policy implications from these insights, and sketches out major research themes going forward. |
| Keywords: | Porter Hypothesis, environmental policy, innovation, performance |
| Date: | 2011–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-01&r=reg |
| By: | Pierre-Richard Agénor; Koray Alper; Luiz Pereira da Silva |
| Abstract: | This paper examines the roles of bank capital regulation and monetary policy in mitigating procyclicality and promoting macroeconomic and financial stability. The analysis is based on a dynamic stochastic model with imperfect credit markets. Macroeconomic (financial) stability is defined in terms of the volatility of nominal income (real house prices). Numerical experiments show that even if monetary policy can react strongly to inflation deviations from target, combining a credit-augmented interest rate rule and a Basel III-type countercyclical capital regulatory rule may be optimal for promoting overall economic stability. The greater the degree of interest rate smoothing, and the stronger the policymaker's concern with macroeconomic stability, the larger is the sensitivity of the regulatory rule to credit growth gaps. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:154&r=reg |
| By: | Éric Tymoigne |
| Abstract: | With the Great Recession and the regulatory reform that followed, the search for reliable means to capture systemic risk and to detect macrofinancial problems has become a central concern. In the United States, this concern has been institutionalized through the Financial Stability Oversight Council, which has been put in charge of detecting threats to the financial stability of the nation. Based on Hyman Minsky's financial instability hypothesis, the paper develops macroeconomic indexes for three major economic sectors. The index provides a means to detect the speed with which financial fragility accrues, and its duration; and serves as a complement to the microprudential policies of regulators and supervisors. The paper notably shows, notably, that periods of economic stability during which default rates are low, profitability is high, and net worth is accumulating are fertile grounds for the growth of financial fragility. |
| Keywords: | Financial Fragility; Financial Regulation; Financial Crises; Macroprudential Risk; Debt-Deflation Process; Ponzi Finance |
| JEL: | E32 G18 G28 G38 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_654&r=reg |
| By: | Keisuke Hattori (Faculty of Economics, Osaka University of Economics); Keisaku Higashida (School of Economics, Kwansei Gakuin University) |
| Abstract: | In this paper, we build a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms. We investigate the effects of regulating misinformation on market competition, behavior of firms, and social welfare. We show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations, including prohibiting misleading advertising, educating consumers, taxing production, and taxing misleading advertising. We then extend the model by introducing two types of heterogeneities; heterogeneous consumers and heterogeneous production costs between firms. |
| Keywords: | Misleading Advertising, Regulation; Duopoly, Product Differentiation, Advertising Externality |
| JEL: | L13 L15 M37 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:69&r=reg |
| By: | Beria, Paolo; Ponti, Marco; Laurino, Antonio |
| Abstract: | The paper presents the structure and the concepts at the basis of a database on world transport infrastructure regulation, to be launched. The database will be built promoting a “soft” survey on the world regulatory practices, to be filled by scholars and experts on a voluntary basis. The goal of the database is to stimulate research on best practices and interaction among regulators, regulated and scholars. The work is still under construction. The database structure is ready and the survey is already launched, but incomplete. This paper is a preliminary document which provides a detailed description of the aims and of the database structure, in order to circulate the project and collect suggestions from the academic community. The structure of the paper is as follows. After a presentation of the aims of the work, section 2 provides a literature review on existing databases. Section 3 details the project, describing the characteristics of the survey, the strengths and weaknesses of the approach, the network to be activated. Section 4 is giving more details on the actual structure of the database and of the corresponding survey. Section 5 gives notice of the first results obtained with a preliminary survey and a preliminary review of literature on some selected countries. Conclusions will outline the next steps of the research. |
| Keywords: | transport; regulation; investment; infrastructure; database; survey |
| JEL: | H0 C42 R48 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29143&r=reg |
| By: | Machiel Mulder (Netherlands Competition Authority) |
| Abstract: | In this paper we analyse the impact of the regulatory framework for the new regulatory period (2011 – 2013) on the long-term profitability of TenneT TSO, the operator of the highvoltage electricity network in the Netherlands. Long-term profitability is a key component of the financeability of a firm. In the long run, the return on capital should be at least equal to the opportunity costs of capital in order to finance investments. As the ultimate indicator for the long-term profitability, we use the net present value of economic profit, which is the difference between total revenues and total costs, including a normal return on capital. In order to simulate the future financial development of the TSO, we developed a model. |
| JEL: | C60 G18 L51 G32 L97 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:nco:wpaper:1012&r=reg |
| By: | Paolo Angelini; Laurent Clerc; Vasco Cúrdia; Leonardo Gambacorta; Andrea Gerali; Alberto Locarno; Roberto Motto; Werner Roeger; Skander Van den Heuvel; Jan Vlcek |
| Abstract: | We assess the long-term economic impact of the new regulatory standards (the Basel III reform), answering the following questions. (1) What is the impact of the reform on long-term economic performance? (2) What is the impact of the reform on economic fluctuations? (3) What is the impact of the adoption of countercyclical capital buffers on economic fluctuations? The main results are the following. (1) Each percentage point increase in the capital ratio causes a median 0.09 percent decline in the level of steady state output, relative to the baseline. The impact of the new liquidity regulation is of a similar order of magnitude, at 0.08 percent. This paper does not estimate the benefits of the new regulation in terms of reduced frequency and severity of financial crisis, analysed in Basel Committee on Banking Supervision (BCBS, 2010b). (2) The reform should dampen output volatility; the magnitude of the effect is heterogeneous across models; the median effect is modest. (3) The adoption of countercyclical capital buffers could have a more sizeable dampening effect on output volatility. These conclusions are fully consistent with those of reports by the Long-term Economic Impact group (BCBS, 2010b) and Macro Assessment Group (MAG, 2010b). |
| Keywords: | Basel III, countercyclical capital buffers, financial (in)stability, procyclicality, macroprudential |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:338&r=reg |
| By: | Beria, Paolo; Grimaldi, Raffaele |
| Abstract: | In this paper we analyse some possible unconventional factors of efficiency in public transport. The occasion for such analysis rises from a case study in the southern Italian region of Sicily. Most of the regional bus service is here historically franchised to some local private bus companies, without tenders or any other form of competition. The structure of the network has never been planned ex-ante, as it is the result of negotiations among bus companies, local and regional authorities. Though this situation is obviously quite far from indications of the regulation theory, it results in a surprisingly efficient system, with very low unit costs. An analysis of this situation is here carried out in order to understand which factors are forcing those companies to be efficient and which problems this situation may generate. The quality and effectiveness of the offered service is also reckoned. Two factors seem to be most relevant to this results: the relatively low level of subsidies together with the fact of being private operators (rather an exception than a rule in Italy). In order to improve their efficiency, those companies also merged together but eventually split again in the last decades in order to reach a more efficient size and suggesting the presence of possible diseconomies of scale in the sector. Taking for granted that a form of regulation is needed, it is here suggested that regulatory strategies should adapt to this counterintuitive fact and not destroy the incentives already effective in the present situation. Our suggestion is to prefer medium sized tenders rather than large ones, not only for granting more contestability, but also for financial reasons. |
| Keywords: | regulation; bus; economies of scale; public transport; tender |
| JEL: | R40 L92 L33 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29234&r=reg |
| By: | Yochanan Shachmurove (Department of Economics, University of Pennsylvania and The City College of The City University of New York) |
| Abstract: | The economic history of the United States is riddled with financial crises and banking panics. During the nineteenth-century, eight major such episodes occurred. In the period following World War II, some believed that these crises would no longer happen, and that the U.S. had reached a time of everlasting financial stability and sustainable growth. The Savings and Loans Crisis of the 1980s, the 2001 dot-com bust and the 2007 housing bubble that led to the current global financial crises demonstrate that these phenomena are still reoccurring. Regulators and policy makers should keep aware of the recurrence of such crises. |
| Keywords: | Financial Crises; Financial Regulations and Reforms; Banking Panics; Banking Runs; Nineteenth and Twentieth Century Crises; Bankruptcies; Federal Reserve Bank; Subprime Mortgage; Troubled Asset Relief Program (TARP); Collateralized Debt Obligations (CDO); Mortgage Backed Securities (MBO); Glass-Steagall Act; J.P. Morgan Chase; Bear Stearns; Augustus Heinze; Timothy Geithner; Paul Volcker. |
| JEL: | E0 E3 E44 E5 E6 N0 N1 N2 G0 G18 G38 |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:11-006&r=reg |
| By: | Shigenori Shiratsuka (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: shigenori.shiratsuka@boj.or.jp)) |
| Abstract: | This paper explores a policy framework for central banks from a macroprudential perspective, to pursue price and financial system stability in a consistent and sustainable manner. Triggered by the recent financial crisis, fundamental reform of the financial system is advocated to establish more stable foundations for supporting sustainable growth in the global economy. Achieving higher stability purely by more stringent microprudential regulations tends to result in lower efficiency in financial intermediation. Crises are fundamentally endogenous to the financial system and arise from exposure to common risks among financial institutions, underpinned by complicated incentives at both the micro and macro levels. In that context, macroprudential policy is often pointed out as a missing element in the current policy framework in order to strike a balance between the efficiency and stability of the financial system as a whole. Pursuing both price and financial system stability in a consistent and sustainable manner requires combination of monetary and prudential policies, especially macroprudential policy. To that end, this paper proposes to extend constrained discretion for monetary policy, proposed as the conceptual basis for flexible inflation targeting, to overall central banking, encompassing monetary and macroprudential policies. |
| Keywords: | Macroprudential policy, Procyclicality, Financial imbalances, Asset-price and credit bubble, Constrained discretion. |
| JEL: | E58 G28 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:11-e-03&r=reg |
| By: | Tim Christensen (Yale University); Stan Hurn (QUT); Ken Lindsay (Glasgow) |
| Abstract: | In many electricity markets, retailers purchase electricity at an unregulated spot price and sell to consumers at a heavily regulated price. Consequently the occurrence of extreme movements in the spot price represents a major source of risk to retailers and the accurate forecasting of these extreme events or price spikes is an important aspect of effective risk management. Traditional approaches to modeling electricity prices are aimed primarily at predicting the trajectory of spot prices. By contrast, this paper focuses exclusively on the prediction of spikes in electricity prices. The time series of price spikes is treated as a realization of a discrete-time point process and a nonlinear variant of the autoregressive conditional hazard (ACH) model is used to model this process. The model is estimated using half-hourly data from the Australian electricity market for the sample period 1 March 2001 to 30 June 2007. The estimated model is then used to provide one-step-ahead forecasts of the probability of an extreme event for every half hour for the forecast period, 1 July 2007 to 30 September 2007, chosen to correspond to the duration of a typical forward contract. The forecasting performance of the model is then evaluated against a benchmark that is consistent with the assumptions of commonly-used electricity pricing models. |
| Keywords: | Electricity Prices, Price Spikes, Autoregressive Conditional Duration, Autoregressive |
| JEL: | C14 C52 |
| Date: | 2011–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:qut:auncer:2011_1&r=reg |