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on Regulation |
| By: | Enrico Perotti (University of Amsterdam, Duisenberg school of finance, and CEPR); Javier Suarez (CEMFI, and CEPR) |
| Abstract: | This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic risk externalities. It focuses on the relative |
| Keywords: | Systemic risk; Liquidity risk; Liquidity requirements; Liquidity risk levies; Macroprudential regulation |
| JEL: | G21 G28 |
| Date: | 2011–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20110040&r=reg |
| By: | Enrico Perotti (University of Amsterdam, Duisenberg school of finance, and CEPR); Lev Ratnovski (International Monetary Fund); Razvan Vlahu (Dutch Central Bank) |
| Abstract: | The paper studies risk mitigation associated with capital regulation, in a context when banks may choose tail risk assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited liability. When capital raising is costly, poorly capitalized banks may limit risk to avoid breaching the minimal capital ratio. A bank with higher capital has less |
| Keywords: | Bank Regulation; Risk Shifting; Capital Requirements; Tail Risk; Systemic Risk |
| JEL: | E6 F3 F4 G2 G3 O16 |
| Date: | 2011–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20110039&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, analyzed in Basel Committee on Banking Supervision (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 sizable dampening effect on output volatility. |
| Keywords: | Basel capital accord ; Business cycles ; Economic conditions ; Bank supervision ; Bank capital |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:485&r=reg |
| By: | Drakopoulos, Stavros A.; Theodossiou, Ioannis |
| Abstract: | The standard treatment of occupational risk in the labour market is conducted in terms of the theory of compensating wage differentials, the basic characteristic of which is that workers can fully estimate actual occupational risks. However, research in cognitive psychology, and recent advances in economic psychology, suggest that individuals consistently underestimate risks associated with accidents. In this paper, we discuss the case when the workers systematically underestimate job risks. After presenting the standard treatment of occupational risks, and of health and safety at work regulation, we then proceed to incorporate the idea of job risk underestimation. The paper discusses the types and impact of regulation on health and safety effort in a simple framework in which workers’ beliefs concerning accident risks also play a role. The paper shows that a particular type of regulatory intervention is necessary for the risk underestimating workers not to suffer a welfare loss. |
| Keywords: | Job Risk; Occupational Health and Safety |
| JEL: | K32 J81 I18 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29643&r=reg |
| By: | Gonenc, Rauf; Rawdanowicz, Lukasz |
| Abstract: | In the 2000s, Turkey has enjoyed rapid catching–up. This was possible despite the adverse business environment, as the semi–formal and informal economy had a significant contribution to the expansion of the private sector. Productivity growth was strong, but labour utilisation remained very low. Looking forward, higher employment and productivity growth will not be possible without profound regulatory reforms of minimum wages, severance payments, social security contributions and flexible job contracts. These reforms have been discussed for a long time, but political obstacles prevented implementing them. Resolving this deadlock calls for advancing an integrated strategy of labour reforms and formalisation via experimenting with new regulation on the voluntary basis to identify the most successful solutions that can be later rolled out to the whole economy. Moreover, Turkey has to ease further anti–competitive product market regulations by reducing barriers to entrepreneurship and foreign direct investment, and by limiting government involvement in business. A successful implementation of these reforms would allow Turkey to enjoy golden decades. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:650&r=reg |
| By: | Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea |
| Abstract: | The present study examines cross-national and sectoral differences in Total Factor Productivity (TFP) in fourteen European countries and ten sectors from 1995 to 2007. The main aim is to ascertain the role of employment protection of temporary contracts on TFP by estimating their effects with a “difference-in-difference” approach. Results show that deregulation of temporary contracts negatively influences the growth rates of TFP in European economies and that, within sectoral analysis, the role of this liberalization is greater in industries where firms are more used to opening short-term positions. By contrast, in our observation period, restrictions on regular jobs do not cause significant effects on TFP, whereas limited regulation of product markets and higher R&D expenses positively affect efficiency growth. |
| Keywords: | productivity; labor regulation |
| JEL: | O47 O43 J58 O40 |
| Date: | 2011–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29698&r=reg |
| By: | Ashot Tsharakyan; Petr Zemcik |
| Abstract: | We study a natural experiment in the Czech Republic where the maximum regulated rent appreciation has depended explicitly on the price of real estate since 2007. We track the tenure choice of households from consumption surveys for subsequent years. Rent deregulation makes households in regulated apartments more likely to own real estate while the opposite is true for other renters and owners. The net present value of buying property vs renting is an increasing function of the real estate price appreciation for renters in regulated apartments. We use their tenure choice to generate the distribution of property price expectations. |
| Keywords: | Czech Republic; expectations; rent regulation and deregulation; real estate prices; tenure choice |
| JEL: | C25 R21 R31 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp430&r=reg |
| By: | Adeline UGAGLIA (USC 2032 GAIA - INRA SAD/ENITAB); Bernard DEL’HOMME (USC 2032 GAIA - INRA SAD/ENITAB); Maryline FILIPPI (USC 2032 GAIA - INRA SAD/ENITAB) |
| Abstract: | An evolutionary framework is used here to study the issue of pesticide reduction in vineyards. After analyzing grape growers’ pesticide lock-in we show that, although Integrated Pest Management (IPM) could reduce pesticide use significantly, the lack of specific implementation know-how hampers its diffusion. Consequently, once the features of technological change for IPM have been scrutinized, we adopt a case analysis approach in which environmental regulation is envisaged as one possible way of promoting IPM diffusion. We also show that, however necessary such regulation is, it is insufficient: grape growers equally need extension services. |
| Keywords: | evolutionary framework, environmental innovation, IPM, pesticides, grape growing |
| JEL: | Q59 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2011-12&r=reg |
| By: | Jerome Adda; Samuel Berlinski; V. Bhaskar; Stephen Machin |
| Abstract: | This paper analyzes the effects of a ban on smoking in public places upon firms and consumers. Analysis of survey data from public houses finds that the Scottish smoking ban (introduced in March 2006) reduced pub sales and harmed medium run profitability. An event study analysis of the stock market performance of pub-holding companies corroborates the negative effects of the smoking ban on firm performance. We develop a model of public good provision by firms to offer an interpretation of these findings. In the context of smoking, the public good aspect and consumer heterogeneity in preferences regarding smoking appear to be central to the problem. The model allows us to examine the appropriate form of optimal regulation and to study the welfare effect of a smoking ban. The optimal policy response ensures that some pubs be permitted to allow smoking while others are not. |
| Keywords: | regulation; smoking ban; market provision of quality; sales; prices; profitability; stock market performance |
| JEL: | I18 H23 L51 L81 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2011/09&r=reg |
| By: | Paul Cheshire; Christian A. L. Hilber; Ioannis Kaplanis |
| Abstract: | Few studies conceive of land as a productive factor but British land use policies may lower total factor productivity (TFP) in the retailing industry by (i) restricting the total availability of land for retail, thereby increasing space costs (ii) directly limiting store size and (iii) concentrating retail development on specific central locations. We use unique store-specific data to estimate the impact of space on retail productivity and the specific effects of planning restrictiveness and micromanagement of store locations. We use the quasi natural experiment generated by the variation in planning policies between England, Wales, Scotland and Northern Ireland to isolate the impact of town centre first policies. We find that TFP rises with store size and that planning policy directly reduces productivity both by reducing store sizes and forcing retail onto less productive sites. Our results, while they strictly only apply to the supermarket group whose data we analyse, are likely to be representative of supermarkets in general and suggest that since the late 1980s planning policies have imposed a loss of TFP of some 25%. |
| Keywords: | Land use regulation, regulatory costs, firm productivity, retail |
| JEL: | D2 L51 L81 R32 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:sercdp:0066&r=reg |
| By: | José Pedro Fique (Faculdade de Economia da Universidade do Porto and LIAAD, INESC-Porto) |
| Abstract: | The turmoil in the financial markets that had its roots in the 2007 US subprime crisis prompted government action all over the world motivated by contagion concerns, leaving a heavy bill for the tax payers to pick up. We find that a contributory regime based on contagion risk exposure changes the trade-off between liquidity coinsurance and counterparty risk that motivates the formation of the financial network in the first place, potentially leading to a less connected architecture. Furthermore, if that regime bestows the weight of the levy on both borrower and lender it has the potential to shift the system towards safer grounds. Since we model bank interactions as a network formation game, we are able to provide an account of the changes that come into play with the introduction of tax, which can be a fundamental factor in the design process of the policy function. |
| Keywords: | Financial Network, Regulation, Counterparty Risk, Liquidity Coinsurance |
| JEL: | D85 G18 G21 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:408&r=reg |