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on Regulation |
| By: | Skold, Alida S. |
| Abstract: | Regulation is written with the intent of protecting the vulnerable. However, it can cause an undesirable result if written without understanding how the positive intent can have a negative impact. In its present form, the proposed Volcker Rule has the potential of expanding the liquidity crisis that devastated the housing market into the capital markets. Risk will be transferred to less regulated entities. Banks conducting business in the U.S. or with U.S. “residents” will be at a competitive disadvantage. |
| Keywords: | Volcker Rule; Regulation; Prop Trading; Market Making; Hedge Fund; Risk |
| JEL: | G38 D02 D78 L50 |
| Date: | 2011–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34672&r=reg |
| By: | Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Wayne Tarrant (Wingate University - Department of Mathematics) |
| Abstract: | Regulation and Risk management in banks depend on underlying risk measures. In general this is the only purpose that is seen for risk measures. In this paper, we suggest that the reporting of risk measures can be used to determine the loss distribution function for a financial entity. We demonstrate that a lack of sufficient information can lead to ambiguous risk situations. We give examples, showing the need for the reporting of multiple risk measures in order to determine a bank's loss distribution. We conclude by suggesting a regulatory requirement of multiple risk measures being reported by banks, giving specific recommendations. |
| Keywords: | Risk measure, Value at Risk, bank capital, Basel II accord. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00639489&r=reg |
| By: | Aldy, Joseph E. (Harvard University); Stavins, Robert N. (Harvard University) |
| Abstract: | Because of the global commons nature of climate change, international cooperation among nations will likely be necessary for meaningful action at the global level. At the same time, it will inevitably be up to the actions of sovereign nations to put in place policies that bring about meaningful reductions in the emissions of greenhouse gases. Due to the ubiquity and diversity of emissions of greenhouse gases in most economies, as well as the variation in abatement costs among individual sources, conventional environmental policy approaches, such as uniform technology and performance standards, are unlikely to be sufficient to the task. Therefore, attention has increasingly turned to market-based instruments in the form of carbon-pricing mechanisms. We examine the opportunities and challenges associated with the major options for carbon pricing: carbon taxes, cap-and-trade, emission reduction credits, clean energy standards, and fossil fuel subsidy reductions. |
| JEL: | Q40 Q48 Q54 Q58 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-041&r=reg |
| By: | Mathias Drehmann; Claudio Borio; Kostas Tsatsaronis |
| Abstract: | We investigate the performance of different variables as anchors for setting the level of the countercyclical regulatory capital buffer requirements for banks. The gap between the ratio of credit-to-GDP and its long-term backward-looking trend performs best as an indicator for the accumulation of capital as this variable captures the build-up of system-wide vulnerabilities that typically lead to banking crises. Other indicators, such as credit spreads, are better in indicating the release phase as they are contemporaneous signals of banking sector distress that can precede a credit crunch. |
| Keywords: | countercyclical capital buffers, financial stability, procyclicality |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:355&r=reg |
| By: | Daley, Jenifer; Matthews, Kent (Cardiff Business School); Zhang, Tiantian (Cardiff Business School) |
| Abstract: | Deregulation, re-regulation and continuing globalisation embody an imperative that banks increase efficiency in order to survive. We employ the Simar-Wilson (2007) two-step double bootstrap Data Envelopment Analysis method to measure whether cost efficiency among Jamaican banks has improved between 1999 and 2009 following a number of post-crisis responses aimed at strengthening and improving the sector. Efficiency is extracted from a meta-frontier construction for the full sample period. In addition we conduct tests for unconditional beta- and sigma-convergence and overall, the results suggest that there has been a tendency towards improvement in bank efficiency levels for the industry as a whole but there is also evidence that foreign banks show a higher trend improvement in efficiency. |
| Keywords: | Bank efficiency; DEA; bootstrap; convergence; Jamaica |
| JEL: | G21 G28 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/27&r=reg |
| By: | Dietrich, Antje-Mareike; Sieg, Gernot |
| Abstract: | This article shows that in the presence of environmental externalities, it may be welfare enhancing to overcome a technological lock-in by a deadend technology through governmental intervention. It is socially desirable to subsidize a dead-end technology if its environmental externality is small relative to the one of the established technology, if the installed base and/or the strength of the network effect is small and if future generations matter. Applying our results to the private transport sector, governments promoting alternatives to gasoline-driven vehicles have to be aware of these opposing welfare effects. -- |
| Keywords: | environmental externalities,network effects,private transport,technological change |
| JEL: | O33 L92 Q55 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tbswps:12&r=reg |
| By: | Rajat Acharyya (CUHK - City University Hong Kong) |
| Abstract: | This paper examines the optimality of environmental standards that are often observed to be imposed by the importing North on exporting South. In the context of goods differentiated in terms of environmental quality and the degree of consumption pollution they generate, consumers' willingness-to-pay varying with such quality and being different across income groups, we show that: (1) competitive environmental qualities are sub-optimal; (2) environmental-quality dependent consumption tax is the first best policy; and (3) when South has a cost advantage in dirty varities, the second-best policy for North is to lower minimum environmental standard from the autarchic level of minimum standard. |
| Keywords: | Environmental quality choice, consumption pollution, environmental standard |
| JEL: | O13 P28 Q34 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:21749&r=reg |
| By: | Aldy, Joseph E. (Harvard University); Stavins, Robert N. (Harvard University) |
| Abstract: | Emissions of greenhouse gases linked with global climate change are affected by diverse aspects of economic activity, including individual consumption, business investment, and government spending. An effective climate policy will have to modify the decision calculus for these activities in the direction of more efficient generation and use of energy, lower carbon intensity of energy, and--more broadly--a more carbon-lean economy. The only approach to doing this on a meaningful scale that would be technically feasible and cost-effective is carbon pricing, that is, market-based climate policies that place a shadow-price on carbon dioxide emissions. We examine alternative designs of three such instruments--carbon taxes, cap-and-trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been and will continue to be largely a function of issues and structural factors that transcend the scope of environmental and climate policy. |
| JEL: | Q40 Q48 Q54 Q58 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-038&r=reg |
| By: | Sugata Marjit (City University of Hong Kong); Amit K. Biswas |
| Abstract: | Stringent regulations coupled with corruption generate and sustain extra legal or informal transactions in the developing countries. Does trade related reform discourage informal activities and corruption? This paper attempts to analyze such a phenomenon. An import competing firm allocates production between a high wage formal and a low wage informal segment. Illegal use of labour in the informal sector is characterized by a probability of punishment which depends on the size of the informal output. In such a structure, as tariff comes down, total employment contracts but the informal sector expands. However, lowering of interest rate, possibly through the liberalization of capital account, tends to reduce the size of the informal segment. Hence, trade reforms may have conflicting impact on informality and corruption. |
| Keywords: | Trade Liberalization, Informal sector, corruption |
| JEL: | F11 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:22896&r=reg |
| By: | Roger Fouquet |
| Abstract: | The purpose of this paper is to understand the long run demand for energy-related environmental quality, its influence on legislation and on transitions to low polluting energy sources. It starts by presenting a simple framework of the relationship between the demand for and supply of environmental quality, environmental legislation and energy. This forms the structure for presenting a series of episodes in British history where a demand for improvements in energy-related environmental quality existed. This analysis proposes that markets can drive transitions to low polluting energy sources, in specific economic conditions. However, most probably, governments will need to push them, and this cannot be expected without strong and sustained demand for environmental improvements. Yet, while demand is a prerequisite, it is not enough. It must also be spearheaded by strong, creative and sustained pressure groups (i.e., powerful lobbying and the weakening of the counter-lobby) to introduce legislation, to enforce it and to avoid it being over-turned by future governments. |
| Keywords: | Energy Transitions, Historical, Environmental Quality, Air Pollution. |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:bcc:wpaper:2011-11&r=reg |
| By: | Kisswani, Khalid/ M. |
| Abstract: | In 1973-1974, the U.S. faced the so-called “Energy Crisis” due to the Arab oil embargo and a quadrupling of world crude oil prices by OPEC. This led the U.S. to use a” Price Control” policy in the domestic energy market. The effects of such policy are explored and well documented. However, the responses of OPEC producers to such a policy need further attention. This paper examines the effects of these price controls on OPEC‟s extraction path. It also examines the relation between the harm function and the change in OPEC production. The results show some evidence that OPEC did respond differently to price controls applied by the U.S. For some periods it cut production, while in other periods production levels increased. The results also show some evidence regarding Wirl (2008) that OPEC includes political support as part of its objective function when it comes to oil extraction. |
| Keywords: | OPEC; Price Controls; Energy Economics; Oil |
| JEL: | C00 C20 Q40 Q30 |
| Date: | 2011–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34624&r=reg |
| By: | Bulow, Jeremy (Stanford University); Klemperer, Paul (Oxford University) |
| Abstract: | Price controls lead to misallocation of goods and encourage rent-seeking. The misallocation effect alone is enough to ensure that consumer surplus is always reduced by a price control in an otherwise-competitive market with convex demand if supply is more elastic than demand; or when demand is log-convex (e.g., constant-elasticity) even if supply is inelastic. The same results apply both when rationed goods are allocated by costless lottery among interested consumers, and when costly rent-seeking and/or partial de-control mitigates the allocative inefficiency. The results are best understood using the fact that in any market, consumer surplus equals the area between the demand curve and the industry marginal revenue curve. |
| JEL: | D45 D60 D61 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:2086&r=reg |