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on Regulation |
| By: | Gianni De Nicoló; Marcella Lucchetta; Andrea Gamba |
| Abstract: | This paper studies the impact of bank regulation and taxation in a dynamic model with banks exposed to credit and liquidity risk. We find an inverted U-shaped relationship between capital requirements and bank lending, efficiency, and welfare, with their benefits turning into costs beyond a certain requirement threshold. By contrast, liquidity requirements reduce lending, efficiency and welfare significantly. The costs of high capital and liquidity requirements represent a lower bound on the benefits of these regulations in abating systemic risks. On taxation, corporate income taxes generate higher government revenues and entail lower efficiency and welfare costs than taxes on non-deposit liabilities. |
| Keywords: | Bank regulations , Banking , Capital , Credit risk , Economic models , Liquidity , Taxation , |
| Date: | 2012–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/72&r=reg |
| By: | Askenazy, Philippe (Paris School of Economics); Cette, Gilbert (Bank of France); Maarek, Paul (University of Cergy-Pontoise) |
| Abstract: | Through panel estimates using OECD country-industry statistics, this paper aims to clarify the determinants of rent creation and the mechanisms of rent sharing, and the role of market regulations in these processes. The empirical analysis is carried out in two steps. The first explains the rent creation process. For each country-industry-year observation, the size of rents, measured by the value added price relative to the GDP price, is assumed to depend solely on direct anti-competitive regulations on services and goods. The second step explains the rent sharing process. Three destinations of rents are distinguished for each country-industry-year observation: upstream industries, capital and labour. The main empirical findings are as follows. Regarding the rent creation, direct anti-competitive regulations are associated with a very significant rise in rent size. Concerning the rent sharing, the capital share in value added appears to i) increase with rent size, decrease with anti-competitive regulation in upstream sectors and increase with the industry specific output gap; ii) decrease with the national output gap, increase with the national employment rate and decrease with employment protection regulation; iii) increase with the interaction of rent size and the unemployment rate and decrease with the interaction of rent size and employment protection regulations. These results confirm the existence of three destinations for rents. They also show that the magnitude of each destination depends on the market power of its beneficiary. All these results are robust to a variety of sensitivity checks. |
| Keywords: | rents, capital share, prices, market regulations, output gap, unemployment |
| JEL: | E25 J20 J30 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6443&r=reg |
| By: | Anthony Heyes (University of Ottawa); Sandeep Kapur (Department of Economics, Mathematics & Statistics, Birkbeck) |
| Abstract: | The desire to avoid rousing community hostility may encourage firms to behave in an environmentally responsible manner. It has been conjectured that such 'informal regulation' could effectively replace formal intervention in some settings, and usefully complement it in others. We explore these conjectures with mixed results. Informal regulation is necessarily less efficient than a well-designed formal alternative and the pattern of green behaviour induced by the threat of community hostility may increase or decrease welfare. The existence of community pressure may increase or decrease the optimal calibration of a formal intervention (in this case an environmental tax) and may complement or detract from the incentives generated by an optimally-calibrated tax. |
| Keywords: | community pressure, informal regulation, compliance, enforcement |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:1207&r=reg |
| By: | Zdenìk Kudrna (Austrian Academy of Sciences, Vienna); Juraj Medzihorsky (Central European University, Budapest) |
| Abstract: | This paper compares the bank regulatory regimes in the enlarged European Union in order to test the thesis claiming that international banking standards need to be adapted to emerging market circumstances. On the basis of World Bank surveys, we compile structural indices for the 10 post-communist EU members (emerging markets) as well as 17 advanced EU economies and compare them using Bayesian statistical procedures. Our findings show that there were systematic and significant differences, two-thirds of which can be explained by 8 of the 52 structural characteristics. The new member states regulatory regimes are more rule-based and leave less discretion for authorities, which is consistent with the thesis that the emerging market regulatory regimes — including those within the EU — needed to compensate for limited regulatory resources and higher political and economic volatility. Hence, the new generation of international banking standards should recognize these limitations. |
| Keywords: | banking, emerging markets, European Union, international standards, regulation |
| JEL: | G21 K23 P51 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2012_06&r=reg |
| By: | Simon Bisore; Walter Hecq |
| Abstract: | As one of the offsetting instruments, the Clean Development Mechanism (CDM) allows industrialized countries to meet their compliance objectives by undertaking and financing project activities in developing countries with certified emissions reductions (CERs) in return. Next to Kyoto mechanisms, voluntary offset markets for GHG emissions reductions that are not compliant with the Kyoto Protocol are developing quickly. Emissions offsets in this latter category are verified by official or independent agents but are not certified by regulatory authorities for use as a compliance instrument, and are commonly referred to as verified emissions reductions (VERs) which are not a standardized commodity. This paper compares the two types of projects-based carbon offset markets and analyses the question of complementarity or competition between them in their contribution to the mitigation of global warming as well as to sustainable development in the host countries. |
| Keywords: | Climate change; CDM carbon offset market; Voluntary carbon offset; Competition; Complementarity; Standards; Carbon credits; Sustainable development |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/115381&r=reg |
| By: | Stephen Howes (Asian Development Bank Institute (ADBI)); Paul Wyrwoll |
| Abstract: | The developing economies of Asia are confronted by serious environmental problems that threaten to undermine future growth, food security, and regional stability. This study considers four major environmental challenges that policymakers across developing Asia will need to address towards 2030 : water management, air pollution, deforestation and land degradation, and climate change. We argue that these challenges, each unique in their own way, all exhibit the characteristics of “wicked problemsâ€. As developed in the planning literature, and now applied much more broadly, wicked problems are dynamic, complex, encompass many issues and stakeholders, and evade straightforward, lasting solutions. Detailed case studies are presented to illustrate the complexity and significance of Asia’s environmental challenges, and also their nature as wicked problems. The most important implication of this finding is that there will be no easy or universal solutions to environmental problems across Asia. This is a caution against over-optimism and blueprint or formulaic solutions. It is not, however, a counsel for despair. We suggest seven general principles which may be useful across the board. These are : a focus on co-benefits; an emphasis on stakeholder participation; a commitment to scientific research; an emphasis on long-term planning; pricing reform; tackling corruption, in addition to generally bolstering institutional capacity with regard to environmental regulation; and a strengthening of regional approaches and international support. |
| Keywords: | Environmental Problems, Asia, developing economies of Asia, developing Asia |
| JEL: | O44 Q58 Q56 O10 O53 Q28 Q53 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:eab:develo:23289&r=reg |
| By: | Rana Hasan; Karl Robert L. Jandoc |
| Abstract: | We use data from Indian manufacturing to describe the distribution of firm size in terms of employment and discuss implications for public policy, especially labor regulations. A unique feature of our analysis is the use of nationally representative establishment-level data from both the registered (formal) and unregistered (informal) segments of the Indian manufacturing sector. While we find there to be little difference in the size distribution of firms across states believed to have flexible labor regulations versus those with inflexible labor regulations, restricting attention to labor-intensive industries changes the picture dramatically. Here, we find greater prevalence of larger sized firms in states with flexible labor regulations. Moreover, this differential prevalence is higher among firms that commenced production after 1982, when a key aspect of Indian labor regulations was tightened. Overall, our findings are consistent with the argument that labor regulations have affected firm size adversely. |
| Keywords: | India, Labor regulations, Firm size distribution, manufacturing, employment, public policy |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecq:wpaper:1118&r=reg |
| By: | Danz, David; Engelmann, Dirk; Kübler, Dorothea |
| Abstract: | To address the impact of regulation on ethical concerns of consumers, we study the example of minimum wages. In our experimental market, consumers have monopsony power, firms set prices and wages, and workers are passive recipients of a wage payment. We find that the consumers exhibit considerable fairness towards the workers by buying from the firm with the higher price and the higher wage. We also find that consumers have a tendency to split their demand equally between firms, which is a simple strategy to provide both workers with a minimal payoff. Introducing a minimum wage in a mature market raises average wages despite its significant crowding-out effects on consumers' fairness concerns. Abolishing a minimum wage crowds in consumers' fairness concerns, but crowding in is not sufficient to avoid overall negative effects on the workers' wages. |
| Keywords: | Fairness , crowding out , consumer behavior , minimum wage , experimental economics |
| JEL: | C91 J88 K31 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mnh:wpaper:30146&r=reg |
| By: | Chu, Yun-han |
| Abstract: | Taiwan was one of the few Asian economies that had emerged from the 1997-1998 East Asian financial crisis relatively unscathed. During the 2008-2009 global financial crisis, the island’s shock-absorbing capability turned out to be once more quite respectable. Taiwan inherited a relatively healthy state of financial systems prior to the sub-prime loan crisis and built up a huge foreign reserve. Also foreign banks’ participation in domestic loan market was quite limited. The state dominated the banking sector and closely supervised its lending policy and balance sheet. The island’s macro-economic fundamentals were quite healthy and the government still enjoyed spare fiscal capacity to borrow and spend. Many elements that define Taiwan’s economic resilience have been fostered by some entrenched institutional arrangements and established policy orientations over a long time. Taiwan managed to retain the bulk of these long-running sources of economic resilience despite of the tremendous external pressures by neo-liberal policy advocates to dismantle these “out-dated” policy thinking and practices. Furthermore, despite of the political turmoil after the first power rotation of 2000, the legacy of an independent and proactive central bank, whose reputation and credibility had been strengthened by its record of steering the island safely through the financial crisis as well as the Strait missile crisis, was kept intact. The legacy of prudential financial regulation was also largely kept intact with the concentration of regulatory authority in a new cabinet-level supervisory commission. Taiwan was able to cope with the 2008-09 global financial crisis thanks also to a more enabling regional environment. The political backlash against IMF-imposed austerity measures precipitated a growing awakening among East Asian policy thinkers. Most developing countries in the region have insured themselves through managing exchange rates and building huge currency reserves, so that they could be protected against the tempests of currency speculation and never again would have to call on the IMF. The ideological milieu and the cooperative institutional arrangements in East Asia have changed so much between the two crises. |
| Keywords: | Taiwan , Central Bank of China , State-owned Banks , Fiscal Conservatism , QFII System , Financial Supervisory Commission |
| Date: | 2012–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:jic:wpaper:44&r=reg |
| By: | Vanessa Le Leslé; Sofiya Avramova |
| Abstract: | In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios. |
| Keywords: | Asia and Pacific , Bank regulations , Bank supervision , Banking sector , Capital , Credit risk , Cross country analysis , Europe , North America , Risk management , |
| Date: | 2012–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/90&r=reg |
| By: | Raphael Calel (Grantham Research Institute on Climate Change and the Environment, London School of Economics); Antoine Dechezleprêtre (Centre for Economic Performance, London School of Economics) |
| Abstract: | The European Union Emissions Trading Scheme (EU ETS) has aimed to encourage the development of low-carbon technologies by putting a price on carbon emissions. Using a newly constructed data set that links 8.5 million European companies with their patenting history and their regulatory status under EU ETS, we investigate the hypothesis that the EU ETS has encouraged development of low-carbon technologies. Exploratory data analysis reveals a rapid increase in low-carbon patenting activities at the EPO since 2005, especially among EU ETS regulated companies during the Scheme's second phase. Naive estimates obtained by comparing EU ETS and non-EU ETS firms suggest that the Scheme may be responsible for up to 30% of the increase in low-carbon patenting of regulated companies. However, more refined estimates that combine matching methods with difference-in-differences provide evidence that the EU ETS has not impacted the direction of technological change. This finding appears to be robust to a number of stability and sensitivity checks. While we cannot completely rule out the possibility that the EU ETS has impacted only large companies for which suitable unregulated comparators cannot be found, our findings suggest that the EU ETS so far has had at best a very limited impact on low-carbon technological change. |
| Keywords: | Directed Technological Change, EU Emissions Trading Scheme, Policy Evaluation |
| JEL: | Q54 Q58 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2012.22&r=reg |