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on Regulation |
| By: | Bontems, Philippe; Calmette, Marie-Françoise; Martimort, David |
| Abstract: | This paper studies access pricing in a vertically separated railway sector where the in-frastructure manager sets access charges and chooses network quality, while downstream operators choose transport services. The model characterizes the inefficiencies of unregula-ted vertical separation and then derives optimal regulation with and without public transfers. When transfers are constrained, access charges follow a Ramsey logic modified by downs-tream market power and by cross-effects among long-distance operators. Under asymmetric information, the relevant access cost is no longer the physical marginal cost but a virtual cost that incorporates the information rents of the infrastructure manager and the traffic consequences of incentive constraints. |
| Keywords: | Access pricing ; railroad regulation ; vertical separation ; infrastructure quality ; asymmetric information ; mechanism design ; information rents |
| JEL: | D82 L51 L92 L43 H21 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131798 |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | This paper develops a two-sided model of the payment card market with elastic consumer demand, merchant and network market power, ad valorem interchange fees, cardholder rewards and cash as an alternative payment method. Drawing on insights from public finance, we define a credit card tax—an endogenous wedge between consumer and merchant prices generated by interchange fees, rewards, and credit card adoption. We show how this tax affects equilibrium prices, platform profits and welfare. Our analysis yields a novel and policy-relevant result: Contrary to conventional wisdom, capping interchange fees can increase equilibrium rewards when consumer demand is relatively inelastic. This, in turn, raises credit card adoption and intensifies cross-subsidization, benefiting card users, potentially at the expense of cash users. By contrast, when demand is more elastic, fee caps reduce rewards and card usage, improving outcomes for both groups. We also characterize the conditions under which interchange fee caps enhance allocative efficiency and encourage socially desirable payment choices. Overall, the paper offers new theoretical insights into the regulation of two-sided payment markets. |
| Keywords: | credit cards; two-sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103315 |
| By: | Sophie Tremolet; Laura Madeleine Smith |
| Abstract: | Many countries face the need to reform the regulatory frameworks governing their water and sanitation services to expand access, reduce inequalities and tackle environmental challenges. This working paper examines trends in the economic regulation of water and sanitation services, drawing on lessons learned from a range of institutional models, including regulation by contract, regulation by agency and self-regulation. It highlights policy and regulatory instruments aimed at reducing social and territorial inequalities in access to water and sanitation services. It also explores how economic regulatory frameworks can evolve to better account for growing environmental pressures. Finally, the paper identifies the need for further research and analysis, including the development of a statistically robust survey to benchmark the performance of different regulatory models and inform institutional and regulatory reforms. |
| Keywords: | economic regulation, environmental protection, institutional regulatory models, sanitation, social inequalities, territorial inequalities, water supply |
| JEL: | D63 H23 H53 H54 L95 L98 Q53 Q58 L51 |
| Date: | 2026–05–26 |
| URL: | https://d.repec.org/n?u=RePEc:oec:envaaa:275-en |
| By: | Gülgün Arikan; Alejandra Medina; Alba Ruiz Casas |
| Abstract: | The role of state-owned enterprises (SOEs) in the global economy has increased significantly since 2000. This paper presents a novel methodology to build the OECD Global State-Owned Enterprises Dataset. The dataset will allow policymakers to track their evolution, compare their characteristics across countries and over time, and analyse their impact on economic outcomes. By compiling ownership information at firm-level and applying a consistent SOE definition, the dataset addresses inconsistencies arising from differing national definitions and reporting standards, and provides a reliable foundation for evidence-based policy analysis and reform. |
| JEL: | G32 G38 L32 L33 |
| Date: | 2026–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaae:29-en |
| By: | Nicola Cetorelli; Shohini Kundu |
| Abstract: | Regulation shapes the boundaries of firms. When prudential standards bind asymmetrically across subsidiaries of an integrated organization, internal capital markets become a mechanism for regulatory arbitrage. We study this in U.S. banking, where holding companies encompass both heavily regulated depository institutions and lightly regulated nonbank affiliates. Following Basel III in 2015, holding companies extract equity from nonbank subsidiaries to recapitalize their banks. Bank subsidiaries accumulate 5-8 percentage points more excess capital than comparable standalone banks through internal transfers; consolidated equity, assets, and lending are unchanged. In response to the same regulatory shock, nonbank affiliates within these organizations exhibit declining capital ratios, deteriorating credit quality, and expansion into consumer lending. The consolidated organization remains exposed to nonbank distress. We calibrate stress scenarios to 2008-scale losses on nonbank assets. If parents were to recapitalize distressed subsidiaries, 4-6 percent of holding companies would exhaust their capital buffers. For the most exposed institutions, the apparent improvement in bank safety is substantially overstated once the implicit liability to nonbank affiliates is accounted for. Organizational structure is a fundamental determinant of regulatory outcomes. |
| Keywords: | banks; nonbanks; bank holding companies (BHCs); regulation; arbitrage; boundary of the firm |
| JEL: | G21 G23 G28 G38 |
| Date: | 2026–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:103294 |
| By: | Cristiana Vitale; Rosamaria Bitetti |
| Abstract: | Professional services play a central role in modern economies, both as providers of high-skilled services and as key inputs into a wide range of downstream activities. While regulation of these services is commonly justified by information asymmetries and negative externalities, concerns persist that regulatory frameworks may exceed what is necessary to protect consumers and limit negative spillovers, thereby restricting entry, limiting competition, and reducing productivity. This paper examines how six professions - lawyers, notaries, accountants, architects, civil engineers, and real estate agents - are regulated across fifty countries, drawing on the OECD Product Market Regulation (PMR) database and indicators. It documents substantial cross-country and cross-profession variation in entry and conduct rules, with licensing remaining the dominant regulatory model and restrictive entry requirements more prevalent than conduct restrictions. The analysis shows that many regulatory approaches appear poorly aligned with the actual risks posed by professional activities and that demand-side tools remain underdeveloped. The findings suggest scope for reform through the recalibration of entry requirements, reduction in conduct restrictions, and stronger consumer-facing mechanisms. Aligning regulation more closely with market failures could expand access to professional services, support geographic and social mobility, increase competition, and generate productivity gains across the wider economy. |
| Keywords: | competition, licencing, occupational regulation, PMR indicators, professional services, regulation |
| JEL: | K20 L40 L84 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1865-en |
| By: | OECD |
| Abstract: | Digital markets have profoundly transformed the way consumers interact with businesses, offering new opportunities for innovative goods and services, greater choice, and enhanced convenience. These evolving dynamics create new challenges for both competition and consumer protection authorities, as practices that impact competition may also have an effect on consumer autonomy and choice, privacy, as well as trust, and vice versa. Traditional analytical frameworks based on price, output, information and transparency often fail to capture the full competition and consumer implications of conduct in digital environments. This note examines areas where the two policy areas converge, where gaps remain and how authorities can work together to address challenges arising from digitalisation. |
| JEL: | D12 D18 K21 L13 L40 L41 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:332-en |
| By: | OECD |
| Abstract: | This policy paper provides an overview of the growing fragmentation of cybersecurity regulations across jurisdictions. It examines the main factors driving this fragmentation and outlines its consequences for both governments and businesses, including higher compliance costs, resource diversion from core cybersecurity functions and challenges to effective international co-operation. The paper also maps existing initiatives aimed at promoting greater regulatory coherence at domestic, regional, and international levels. By bringing these elements together, it seeks to support a shared understanding of the current cybersecurity regulatory landscape and mapping out next steps to foster greater coherence through dialogue among policymakers, regulators, and businesses and strengthening the evidence base. |
| Keywords: | cybersecurity, digital security |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaab:384-en |
| By: | OECD |
| Abstract: | Competition rules governing information sharing must balance two primary risks: permissive rules may facilitate tacit collusion or explicit cartel conduct, while overly restrictive frameworks can chill legitimate collaboration and create market inefficiencies. This paper reviews how different forms of information exchange affect firm incentives and market outcomes, drawing on recent economic literature. It also examines how competition authorities across OECD jurisdictions have approached the issue in practice, including through enforcement, case law and guidance. The paper aims to clarify the main factors that shape competitive risk and how those factors are reflected in current assessment and enforcement. |
| Keywords: | antitrust, cartels, collusion, competition, information exchange, information sharing |
| JEL: | D21 D43 D8 K21 L13 L44 C7 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:335-en |
| By: | OECD |
| Abstract: | Competition can control costs and incentivise efficiency in the healthcare sector. This paper examines how regulation interacts with competition in healthcare markets and identifies areas where competition authorities can advocate for pro-competitive regulation. It presents a framework for identifying and reviewing regulatory barriers to competition, and it discusses empirical evidence and relevant experience by competition authorities. It finds that rules such as needs based entry restrictions, or incumbents’ involvement in licensing decisions, can limit entry and reduce capacity. Similar concerns arise in professional regulation, where restrictive definitions of tasks and limited portability of licences can exacerbate workforce shortages and reduce access. The development of digital services can also be slowed down by regulatory barriers, such as the lack of interoperability between electronic records systems. Finally, pro-competitive regulation can support patients and payers by providing them with usable information. |
| Keywords: | advocacy, competition, healthcare, pro-competitive reforms, professional licensing, regulatory barriers to competition |
| JEL: | I11 I18 L11 L4 L5 L8 L44 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:334-en |
| By: | OECD |
| Abstract: | National security considerations are becoming increasingly prominent in economic policymaking, reflecting geopolitical developments, technological change and growing attention to economic security, resilience and technological capability. As these considerations extend beyond traditional defence-related domains, they are intersecting more frequently with competition enforcement across a widening range of sectors, such as energy, telecommunications and advanced technologies. This paper examines the implications for competition authorities. It develops an analytical framework to distinguish between concerns that can be assessed using established competition law tools, where they can be expressed as competition-relevant effects, and those that fall outside the analytical remit of competition authorities and require assessment by governments or specialised bodies. Drawing on cross-jurisdictional experience, the paper analyses how national security considerations arise in the assessment of competitive constraints, merger control, co-ordinated conduct, unilateral conduct and remedy design. It identifies key considerations for preserving analytical boundaries, institutional roles, legal predictability and effective enforcement in an evolving policy environment. |
| Keywords: | competition, competition policy, defence capabilities, enforcement, national security, self-reliance, sovereignty, strategic autonomy, supply chain resilience |
| JEL: | D4 D47 F5 F52 F6 H5 H56 K21 L1 L4 L5 L78 L98 F1 |
| Date: | 2026–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:336-en |
| By: | Cremer, Helmuth; Borsenberger, Claire; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle |
| Abstract: | We study environmental policy in imperfectly competitive markets where firms differ in their objectives. Alongside standard profit-maximizing firms, we consider welfareoriented firms that partially or fully internalize environmental externalities but are subject to financial viability constraints. Wedevelop a Cournot model in which production generates emissions and firms may differ in the extent to which they account for environmental damages. We characterize market equilibria and examine the effects of environmental taxes and output subsidies on emissions, output, profits, and welfare. Our analysis shows that standard Pigouvian prescriptions are modified by the presence of market power and by the break-even constraints faced by welfare-oriented firms. While emissions taxes reduce environmental damages, they may also exacerbate underproduction and threaten the viability of socially responsible firms. Conversely, output subsidies may improve welfare despite increasing emissions. The welfare ranking of policy instruments depends critically on the interaction between environmental externalities, imperfect competition, and firms’ financial constraints. These findings suggest that environmental policy design should account not only for emissions reduction, but also for the market structure and sustainability of firms with socially oriented objectives. |
| Keywords: | Environmental policy; imperfect competition; heterogeneous firm objectives; corporate social responsibility; Pigouvian taxation; break-even constraints. |
| JEL: | H23 L13 D62 Q58 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131729 |
| By: | OECD |
| Abstract: | Given the limited resources available to competition authorities, decisions around case prioritisation and prosecutorial discretion play a fundamental role in shaping the effectiveness of competition policy. This paper, supported by original survey evidence, highlights how such decisions influence the actions that competition authorities take and reflect their strategy and overall priorities. Effective case prioritisation requires striking a balance between discretion, transparency and cost-benefit based decision making. Authorities should consider developing procedures and public guidance to provide clarity and transparency to these decisions, and develop healthy case pipelines to make the exercise meaningful. |
| Keywords: | case prioritisation, competition authority effectiveness, competition enforcement, competition policy, international cooperation, market studies, prosecutorial discretion |
| JEL: | K21 L4 L40 L41 L42 L49 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:333-en |
| By: | Hong Lee (Korea Institute for Industrial Economics and Trade) |
| Abstract: | Digitization has enabled two-sided platforms to reshape search and access in professional service markets long coordinated by incumbent associations. This paper examines the decade-long conflict between LawTalk and the Korean Bar Association and places it in comparative perspective with similar disputes in real estate, tax services, telemedicine, and mobility.<p> Building on two-sided market theory, differentiated-product competition, and recent empirical evidence from Korea’s legal-services market, the paper argues that platform entry in credence-goods markets tends to expand demand by reducing search friction and widening the product space rather than merely reallocating existing demand. The LawTalk case demonstrates how a regulatory shift, from exclusion toward coexistence, can allow for lawful intermediation while maintaining core professional norms.<p> The paper concludes that policy should govern the interface through transparency, auditability, and a clear separation between advertising and professional services, instead of categorical restrictions that reduce access without welfare gains. |
| Keywords: | digital platforms; legal services; anti-competitive behavior; competition theory; competition policy; digitization |
| JEL: | D43 D45 D47 D61 D74 D82 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022560 |
| By: | Celso Brunetti; Jeffrey H. Harris; Ioannis Spyridopoulos |
| Abstract: | No, in the mortgage market. Using confidential micro-level data combining mortgage contracts with credit and repayment records for 44 million loans spanning 5, 000 bank mergers over nearly three decades, we find no changes to mortgage rates, approval rates, or delinquency rates. Local mortgage markets remain remarkably competitive despite consolidation, averaging over 100 active lenders in each county every post-merger quarter. Our findings reveal significant merger selection motives: large acquiring banks target community banks with relationship-intensive, portfolio-lending business models, whereas community banks appear to merge together to gain scale and compete. Overall, our study challenges the view that bank mergers increase market concentration and create market power that harms household borrowers. |
| Keywords: | bank mergers; banking consolidation; mortgage lending; market power; competition; community banking; consumer welfare; credit access |
| Date: | 2026–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103337 |
| By: | Yuhang Wu; Assaf Zeevi |
| Abstract: | On a platform with many sellers, should a pricing algorithm explicitly model competitors' prices when learning demand? Classical learning arguments suggest an affirmative answer: ignoring competitors induces model misspecification and inefficiency. In contrast, recent work on algorithmic collusion suggests that strategic obliviousness -- deliberately ignoring competitor prices -- may facilitate collusive outcomes and improve profits. We study this modeling choice in a stylized competitive market with unknown noisy demand, in which multiple sellers repeatedly set prices and estimate demand via iterated least squares, and either incorporate competitors' prices into their demand models (informed) or ignore them (oblivious). We first show that, relative to a monopolist, an oblivious seller in a competitive market must explore more aggressively to compensate for the loss of dynamic competitor information. Building on this insight, we characterize market dynamics when all sellers are oblivious and show that prices converge to the competitive outcome under sufficient exploration, while a continuum of pseudo-equilibria arises when exploration decays. Analyzing the resulting price trajectories, we uncover an excursion phenomenon that gives rise to transient collusive patterns that dissipate as learning progresses. In markets with both oblivious and informed sellers, the informed strictly out-earn the oblivious. Read as a strategy game, the modeling choice has a unique Nash equilibrium: the all-informed market, in which prices converge to the competitive outcome efficiently. Overall, our results indicate that collusive patterns are not robust and are not sustained by oblivious modeling; therefore, incorporating competitor information, together with sufficient price exploration, remains a reliable strategy for sellers in competitive markets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.05363 |
| By: | Koltunov, Maksym; Tricarico, Luca; Bisello, Adriano |
| Abstract: | This paper examines the financing of energy communities in Italy, focusing on the roles of key actors, financial instruments, and project builders. It also analyses the economic and ESG impacts that financing actors expect from energy communities. These expectations are shaped by Italy's progressive regulatory framework, which has already supported more than 422 energy communities. We conducted 19 semi-structured interviews with stakeholders involved in financing and building energy communities, supplemented by extensive desk research. Our descriptive analysis identified the financing instruments used by different actors and their recipients both within and beyond the ECs. Thematic analysis highlights the crucial role of municipalities and technical partners in successful project implementation, though municipalities often face significant challenges. Mixed funding, a balanced energy production-consumption ratio, and scalable installations are essential to attract private investment; however, social fund regulations substantially prolong payback periods. Therefore, private actors are primarily driven by indirect economic (e.g., cross-selling, territorial presence) and strategic benefits, while public stakeholders focus on social outcomes. Nonetheless, ECs' potential to address energy poverty is limited by incentive tariff design and modest private-sector engagement. These factors, along with low economic returns, risk undermining ECs viability once subsidies end. The article concludes with stakeholder and policy recommendations aimed at enhancing private investment while advancing the social objectives of energy communities. |
| Keywords: | Energy communities; community energy; Italy; financing; ESG; investment; policy; impact |
| JEL: | G23 L3 L94 L98 |
| Date: | 2026–04–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128721 |
| By: | Chetana Chaudhuri (National Council of Applied Economic Research); Raktimava Bose (National Council of Applied Economic Research); Sanjib Pohit (National Council of Applied Economic Research) |
| Abstract: | This paper presents a comprehensive analysis of India's water resources through the construction and application of Physical Supply and Use Tables (PSUT), providing a systematic framework for understanding sectoral water allocation, consumption patterns, and policy implications. Using the System of Environmental-Economic Accounting (SEEA) methodology, we examine water flows across agricultural, industrial, energy, and municipal sectors, revealing critical insights into India's water security challenges. Expectedly, our analysis shows that agriculture dominates water consumption at 859 billion cubic metres (BCM) (81% of total abstraction), with rice alone accounting for 341 BCM, followed by wheat (106 BCM) and sugarcane (70 BCM). The industrial sector consumes 20 BCM, with engineering and pulp-and-paper industries being the largest users, while the energy sector requires 12 BCM, predominantly for coalbased electricity generation. We find that surface water provides 690 BCM and groundwater contributes 239 BCM to total abstraction of 1, 122 BCM. The return flows amount to 1, 053 BCM, indicating substantial potential for wastewater treatment and reuse expansion. The paper demonstrates how water accounting frameworks can inform evidence-based policy formulation, particularly for demand management, pricing reforms, and intersectoral water reallocation. The research contributes to the growing literature on environmental-economic accounting by providing the first comprehensive PSUT analysis for India's water sector, offering a replicable methodology for other developing economies facing similar water stress challenges. |
| Keywords: | Water accounting, Water Supply and Use Tables, SEEA methodology, sectoral water allocation, sustainable water management |
| JEL: | Q25 E16 Q56 Q28 |
| Date: | 2025–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:nca:ncaerw:188 |
| By: | James Flynn (Department of Economics, Miami University); Michael F. Pesko (Department of Economics, University of Missouri); Christian Saenz (Yale University) |
| Abstract: | We consider the impact of state laws that prohibit conduct already barred under federal law. In particular, we examine the effectiveness of state minimum legal sales laws for tobacco, or tobacco 21 laws, implemented after the federal T21 law in December 2019. Using difference–in–differences modeling that exploits the staggered implementation of tobacco 21 legislation (T21) in 28 states after 2019, we find that these state T21 laws consistently have little to no effect on smoking and vaping among adults ages 18 to 20, nor for high school youth. Our findings indicate that state T21 laws offer little marginal benefit under a unified federal T21 regime. We discuss voluntary compliance as a likely explanation for these findings. |
| Keywords: | Tobacco control, minimum legal sales age, youth smoking and vaping, state vs federal regulation, policy redundancy |
| JEL: | I18 K32 H75 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:umc:wpaper:2601 |
| By: | Morgandi, Matteo; Alzate, David; Hatayama, Maho |
| Abstract: | The note is divided into three parts. Part One provides a conceptual framework for understanding labor market dynamics and market failures typical of platform work. It then summarizes regulatory responses to these failures based on a review of regulations from middle- and high-income countries. We find that authorities have taken two main regulatory approaches. The first focuses on improving and clarifying the classification of platform workers, with the goal of giving at least some platform workers the opportunity to be treated as formal employees and to enjoy the full package of labor and social protection rights enshrined in the existing legislation. The second, adopted by several middle-income countries, creates special regulations or amends existing labor regulations specifically tailored for platform workers. These tailored regulations provide a more limited set of rights than those granted to formal employees. They are also often crafted after engagement with stakeholders in social dialogue. |
| Date: | 2026–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:hdnspu:207514 |
| By: | Hong Lee (Korea Institute for Industrial Economics and Trade); Sung Wook Hong (Korea Institute for Industrial Economics and Trade) |
| Abstract: | This study examines worsening instability in the oil industry’s supply chain due to the ongoing conflict in the Middle East and the blockade of the Strait of Hormuz, which has placed severe upward pressure on international oil prices. Prices of petroleum-based products in South Korea have risen rapidly, increasing the burden on consumers and fueling inflation concerns. Rising international oil prices are highly likely to feed through to the real economy through increased transportation, logistics, and manufacturing costs. Skyrocketing prices for Dubai crude (up 49.8 percent) and domestic gasoline prices (up 12.7 percent) since the US and Israel began their campaign against Iran have exceeded the initial increases seen when Russia invaded Ukraine. In response, the Korean government implemented a price cap system to mitigate market anxiety and the spread of inflation expectations. This system, which sets a cap on the prices that oil refiners are allowed to sell at every two weeks, has been in effect since March 13, 2026. Following its implementation, national average gasoline and diesel prices fell by KRW 70 to KRW 120 from their peaks, showing a stabilizing trend. The government is also considering a packaged response that combines price caps with other policy instruments, such as fuel tax cuts and direct subsidies to consumers. This package of policies could temporarily suppress rapid price surges and ease the burden on consumers, but it also risks exacerbating non-price rationing and long-term supply shortages. <p> Ceilings on prices prevent the price signal from constraining demand, which during a supply shock can worsen shortages, lead to long lines at the pump, and eliminate price competition among retailers. Therefore, price caps on petroleum need to be utilized with great care as a short-term market stabilization tool, rather than as a permanent feature. <p> Future policy responses should take a package approach that combines various policy instruments, including fuel tax cuts, direct support, the utilization of strategic petroleum reserves, and diversification of import sources. Given that fuel dependency and cost structures vary by industry, a differentiated policy response considering industry-specific characteristics is necessary, rather than a uniform price regulation. Industries such as logistics, freight, fisheries, agriculture, and public transportation are particularly exposed to fuel costs, meaning oil price shocks are highly likely to be passed through to production and transportation costs. Thus, the government should design targeted support or fuel-cost subsidies. For the oil refining, petrochemical, and energy-intensive manufacturing sectors, a policy approach considering supply stability and cost buffering is needed so that medium- to long-term security of supply and investment incentives are not adversely affected |
| Keywords: | energy; energy supply and demand; energy pricing; price ceilings; price caps; energy policy; energy markets; oil prices; US-Iran war; Hormuz |
| JEL: | Q41 Q43 Q48 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kietia:022568 |
| By: | Iñaki Aldasoro; Sebastian Doerr; Haonan Zhou |
| Abstract: | We establish a causal link between liquidity regulation and a lower cost of bank wholesale funding. For identification, we use pre-determined variation in banks' liquidity coverage ratio (LCR) in a difference-in-differences setup. Granular instrument-level data allow us to carefully control for any observable and unobservable time-varying factors at the creditor, instrument type, and macroeconomic levels. We find that banks with greater LCR exposure see a steeper decline in their wholesale funding costs. Consistent with seminal theoretical papers on bank liquidity risk, we provide novel evidence that wholesale funding costs decline by more for longer-maturity instruments and that banks shift from short to longer maturity liabilities. Our results support the argument that bank regulation can– at least partly– offset its costs to intermediaries through cheaper wholesale funding. |
| Keywords: | liquidity coverage ratio, liquidity risk, Basel III, money market funds, market discipline |
| JEL: | G21 G23 G28 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1352 |