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on Regulation |
| By: | Jonas M\"uller; Marcus Hildmann; Andreas Ulbig; G\"oran Andersson |
| Abstract: | The grid integration of intermittent Renewable Energy Sources (RES) causes costs for grid operators due to forecast uncertainty and the resulting production schedule mismatches. These so-called profile service costs are marginal cost components and can be understood as an insurance fee against RES production schedule uncertainty that the system operator incurs due to the obligation to always provide sufficient control reserve capacity for power imbalance mitigation. This paper studies the situation for the German power system and the existing German RES support schemes. The profile service costs incurred by German Transmission System Operators (TSOs) are quantified and means for cost reduction are discussed. In general, profile service costs are dependent on the RES prediction error and the specific workings of the power markets via which the prediction error is balanced. This paper shows both how the prediction error can be reduced in daily operation as well as how profile service costs can be reduced via optimization against power markets and/or active curtailment of RES generation. |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1407.7237&r=reg |
| By: | Steffen Hoernig, Marc Bourreau, Carlo Cambini |
| Abstract: | This paper studies the effect of termination rates on substitution between fixed and mobile calls and access, in a model where heterogeneous consumers can subscribe to one or both types of offers. Simulations show that each (fixed or mobile) termination rate has a positive effect on the take-up of the corresponding service, via the waterbed effect, and lowers subscriptions to the other service, via a cost effect. The prevailing asymmetric regulation, with very low fixed and higher mobile termination rates, corresponds to the social optimum. However, the interests of the mobile operators and of the different customer groups do not coincide. JEL codes: L51, L92 |
| Keywords: | Network competition, Fixed-mobile substitution, termination rates |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp588&r=reg |
| By: | Don Fullerton; Li Gan; Miwa Hattori |
| Abstract: | Using three years of data from the 47 prefectures of Japan, we estimate behavior of households who simultaneously make discrete decisions about vehicle ownership and continuous decisions about driving distance. We use the estimated parameters to calculate elasticities and to simulate the effects of alternative pollution control policies such as taxes on gasoline, on distance, or on particular cars. Given choices about cars and distance, we also calculate emissions. Since we model simultaneous choices, both the chosen distance and the chosen car can be affected either by a tax on distance or by a tax on car characteristics. We find expected signs for coefficients on price and income. Car choices are relatively inelastic, however, either to taxes on cars or to taxes on gas or distance. Thus emissions are more affected by taxes on gasoline than by taxes on particular vehicles. Yet taxes on cars have lower costs on consumers and thus lower marginal cost of abatement. Given that the existing gas tax already achieves some abatement, mostly through driving reduction, this analysis suggests that further abatement from the use of distance-reducing taxes is more costly than achieving some marginal abatement from induced changes in car choices. The option with the lowest cost is to tax each car at a rate proportional to its emission rate. |
| JEL: | H23 Q52 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20333&r=reg |
| By: | Luciano de Castro; Shmuel Oren; Alvaro Riascos; Miguel Bernal |
| Abstract: | This paper evaluates the impact of Resolution CREG 051 on the performance of the electricity markets in Colombia. We found out that productive efficiency has improved since the introduction of the Resolution, that is, the total costs of producing electricity have been reduced. This shows a positive impact of the Resolution. On the other hand, we also found that mark-ups and forward energy prices (from bilateral contracts) have increased since 2009, suggesting that there was an increase in the exercise of market power by producers. From the two previous points, we conclude that, although the productive efficiency has increased, the larger share of the efficiency gains were appropriated by the energy producers, rather than passed on to consumers. Classification JEL: D22, D44, L94, Q41 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:830&r=reg |
| By: | Ramón, Sotelo |
| Abstract: | During the electoral campaign for the general elections held on 22nd September 2013 the lobby group representing the tenants proposed a rent regulation in the housing sector concerning also new contracts for existing housing beyond social housing. This proposal was immediately included into their political agenda by the social democrats (SPD) and very shortly afterwards also taken as a position by chancellor Merkel as leader of the Cristian Democratic Party (SPD), although many doubts were expressed within her own party. Only the liberal party opposed to any type of rent control, but did in the end not enter parliament. After elections a coalition between the Social Democrats and the Cristian Democratic Parties was established and the implementation of the rent control fixed. This paper analyses the political reasons for the behavior of Angela Merkel, looks at the expected results from this rent control concerning the allocation of flats, the proportion of home-ownership, the ongoing segregation within cities, and the future construction of new housing. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2014_245&r=reg |
| By: | Gregory Rosston (Stanford University) |
| Abstract: | Over the past 80 years, the Federal Communications Commission has been responsible for the allocation of non-governmental use of the radio frequency spectrum. Over that time, here have been significant changes in spectrum use that have been driven by changes in demand and technology. The technical, regulatory, and business obstacles in past reallocations shed light on some of the FCC’s implementation decisions for its upcoming two-sided auction. |
| Keywords: | Spectrum; Competition; Regulation. |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:sip:dpaper:13-035&r=reg |
| By: | Heinrich, Michael; Wurstbauer, Daniel |
| Abstract: | The current structural low-interest environment is encouraging institutional investors to rethink their asset allocation strategies and increase their exposure towards alternative asset classes, such as real estate and infrastructure. This is particularly the case for insurance companies, which come under pressure to reduce their investment in currently low-yielding government bonds, given the high interest rate guarantees associated with obligations from existing life insurance contracts. As a consequence, insurance companies may be forced to rearrange their assets appropriately. However, the forthcoming Solvency II Directive could counteract this scenario. After Solvency II comes into effect, insurance companies will be subject to higher capital requirements aimed at ensuring insurance-protection even in the case of macroeconomic shocks. The Solvency Capital Requirements (SCR) varies by asset class and is determined by the Solvency II standard formula, which also determines the methodology used to aggregate the respective required equity position. Therefore, it may become necessary for insurers to minimize the SCR by means of their asset allocation, depending on their capitalization, profitability and the general competitive dynamics. If the results of such an optimization are not in accordance with those of conventional optimal asset allocation, Solvency II will lead to inefficient capital allocation in practice. As a result, the portfolio risk would increase, which contradicts the original purpose of the regulation. Furthermore, changing investment behavior from insurers might also have direct effects on the pricing and the product range offered on the capital markets, e.g. for real estate investments.We therefore analyze, whether the Solvency II standard formula could indeed cause the abovementioned incentive incompatibility with respect to the asset allocation process. The main focus lies on the potential shift of direct real estate and direct infrastructure weights within the portfolios of insurers under the Solvency II regime. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2014_84&r=reg |
| By: | Basu, Kaushik |
| Abstract: | Ponzis are among the most ubiquitous and least understood phenomena of economic life. They acquired a certain salience with the global financial crisis of 2008 and the crash of Bernie Madoff’s celebrated Ponzi scheme. This paper explains the structure of Ponzi schemes and goes on to argue that what makes this such a troubling phenomenon is its ability to be camouflaged amidst legitimate practices. It is shown, for instance, that the common practice of giving stock options to employees could be a potential Ponzi that allows corporations to flourish for a while by borrowing from its own future. The paper goes on to discuss the need for intelligent regulation to incise harmful Ponzis (not all Ponzis are harmful) while taking care not to damage other legitimate activities that surround them. |
| Keywords: | Debt Markets,Access to Finance,Emerging Markets,Markets and Market Access,Economic Theory&Research |
| Date: | 2014–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6967&r=reg |
| By: | Marco Pagano (Università di Napoli Federico II CSEF, EEIF, CEPR and ECGI) |
| Abstract: | This paper distils three lessons for bank regulation from the experience of the 2009-12 euro-area financial crisis. First, it highlights the key role that sovereign debt exposures of banks have played in the feedback loop between bank and fiscal distress, and inquires how the regulation of banks’ sovereign exposures in the euro area should be changed to mitigate this feedback loop in the future. Second, it explores the relationship between the forbearance of non-performing loans by European banks and the tendency of EU regulators to rescue rather than resolving distressed banks, and asks to what extent the new regulatory framework of the euro-area “banking union” can be expected to mitigate excessive forbearance and facilitate resolution of insolvent banks. Finally, the paper highlights that capital requirements based on the ratio of Tier-1 capital to banks’ risk-weighted assets were massively gamed by large banks, which engaged in various forms of regulatory arbitrage to minimize their capital charges while expanding leverage. This argues in favor of relying on a set of simpler and more robust indicators to determine banks’ capital shortfall, such as book and market leverage ratios. JEL Classification: G01, G21, G28, G33. |
| Keywords: | bank regulation, euro, financial crisis, sovereign exposures, forbearance, bank resolution, bank capital requirements. |
| Date: | 2014–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:370&r=reg |
| By: | Ametefe, Frank; Stevenson, Simon; Devaney, Steven |
| Abstract: | In this paper, we propose and implement the concept of Liability Driven Investment within the context of defined contribution pension funds, which do not have implicit liabilities. We adopt a transitional approach, by moving from a one period mean variance analysis through to a dynamic optimisation approach. This approach would enable us to see how different approaches could result in significant allocations to the various asset classes. We begin by constructing one period mean variance portfolios for different points on the risk aversion spectrum. We make use of the risk aversion figures provided in Hanna et al (2001). Here, we observe how the allocation to real estate is influenced by different risk tolerance levels. In general, it is believed that as people get closer to retirement, their risk aversion increases. Thus, results from this section would provide a guideline for the proportion of the various assets would have to be included at different points in time. Next, we run an Asset Liability Management (ALM) using a model similar to that used by Booth (2002). We construct the liability driven portfolios using the following liability benchmarks: (i) Long term government bonds (ii) Index-linked bonds (iii) Age profile of the UK. Further, we analyse the role that real estate plays in these portfolios by imposing regulatory constraints which directly impact the allocation to real estate. We obtain these regulations from the OECD (2013) Annual Survey of Investment Regulation of Pension funds. Our analysis is done from the perspective of a a UK defined contribution pension fund, although we use global indices to diversify globally. Also, in applying the rules, we simply apply the various rules currently in place (as at 2013) in all the countries even though these rules might not be in existence in the UK. We aim to determine, in general, what different regulations with respect to real estate would ultimately impact on pension fund outcomes. Also, further analyse role that real estate assets play in the resulting portfolios, we make use of a disaggregated IPD index instead of overall returns used in other studies. We include all the the various sectors that make up the IPD index and treat them as independent asset classes. Finally, following Dempster et al (2002), we use a dynamic ALM model which is a variant of the Computer-Aided Asset Liability Management (CALM) Model of Dempster (1993). This approach has also been used by Consigli and Dempster (1998 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2014_180&r=reg |
| By: | Ploegmakers, Huub; Beckers, Pascal; van der Krabben, Erwin |
| Abstract: | This paper explores the relationship between the planning environment and investment in commercial and industrial buildings in the Netherlands. Most past research on the impact of the planning environment on outcomes in real estate markets has investigated the impact of regulation on (house) prices, with the majority of studies indicating that increased planning restrictions lead to higher prices. However, these studies do not consider the impact of planning on construction activity directly. Furthermore, most existing empirical work has narrowed the effect of the planning environment to the impact of development controls. In addition to a measure of restrictions on industrial land release, this paper incorporates an indicator of regeneration initiatives for rundown industrial sites into a model of investment in buildings on industrial sites. Whereas planning restrictions are generally expected to exhibit a negative impact on new construction (this paper also explores the impact of planning constraints on investment in modernization and refurbishment), the latter measure is assumed to capture some of the positive impacts of planning. In fact, one of the main objectives of regeneration initiatives for rundown industrial sites is to stimulate private investment in new and existing buildings on these sites. This study makes use of micro data on expenditure in modernization, refurbishment and new buildings by firms located on industrial sites. In this regard, we use data on non-residential building permits issued by Dutch municipalities between 1997 and 2008. Besides the local planning environment, this paper also considers the impact of other location variables such as accessibility as these are assumed to increasingly dominate investment activity at more disaggregate spatial levels. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2013_212&r=reg |
| By: | Hoffmann, Martina |
| Abstract: | This paper shows how the real estate market is influenced by the new Energy Performance Certificate Template-law 2012, focused on condominium market in Vienna. The purpose of the following study was to analyze the changed role of real estate agents and to show their reactions towards the new market situation. Therefore it was decided to observe the advertisement market carefully. The observation concentrated on the following two questions: 1. Changed role of the real estate agent 2. Changes on the condominium advertisement market until December, 1st, 2012?Since November 17th, 2012 until December 22nd 2012, 1474 advertisements of the Viennese condominium market, listed in the IMMO Kurier were analyzed. The IMMO Kurier is a supplement of a well-known Austrian daily newspaper, which appears every Saturday. Due to the investigations it could be identified, that the total amount of advertisements decreased whereas the quantity of advertisements including the calculated heating demand increased. Therefore real estate agents are fulfilling the legal requirements of EAVG 2012 and do not risk penal provisions. In conclusion the real estate market was redesigned by EAVG 2012 and the impacts have to be observed and analyzed. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2013_126&r=reg |