Evaluating the prospective effects of alternative regulatory policies on the investment behaviour and environmental performance of a newly liberalised electricity industry in Taiwan

The research explores the potential effects of alternative regulatory policies for electricity market liberalisation on the investment behaviour and environmental performance of the electricity industry in Taiwan. The results provide insights into how the electricity market might evolve under the proposed reform scheme and other possible scenarios. This paper begins by reviewing the characteristics of the industry and how it has developed so far, and follows by studying the planned liberalisation agenda and the main purposes of the regulatory policies. Whether the liberalised electricity market will develop in a desirable direction is investigated by analysing investors’ aspirations for the market and their possible reactions to regulatory policies. The paper focuses on the investment decisions of the generation sector and concludes with assessments of the implications for security of supply, fuel diversity, electricity price and the environment.     

Competition and Innovation in Retail Electricity Markets: Evidence from Italy

Italy's 2015 Annual Competition Law, if finally approved, provides for phasing out retail electricity price regulation, as well as the implementation of full retail liberalisation, from 1 July 2018. This is a significant reform, not just because it is consistent with the broader market design for electricity. Indeed, retail liberalisation is a qualifying element of the full integration of the European Union's electricity market. The full opening of retail markets provides a great opportunity for innovation, both on the demand side and on the supply side. This article investigates the theoretical background, and presents some empirical evidence, on the competition–innovation nexus in retail electricity markets.     

Volatility and error transmission spillover effects: Evidence from three European financial regions

This study uses the multivariate GARCH-BEKK modelling approach to examine the transmission of news (both volatility and error) between portfolios of cross-listed equities within three European financial regions, that is, the Scandinavian (Denmark, Sweden, Finland and Norway), the Germanic (Austria, Switzerland and Germany) and the French area (Brussels, France, Italy, Holland and Spain). We find that the Finnish and Danish portfolios of cross-listed equities are the main transmitters of volatility relative to the Swedish and Norwegian portfolios of cross-listed equities. On the other hand, the Swiss portfolio of cross-listed equities is the major exporter of volatility and error to the other portfolios of cross-listed equities in the Germanic stock market area. Finally, the Paris, Amsterdam and Brussels stock exchanges are the major exporters of volatility and error to the portfolios of cross-listed equities traded on the Milan and Madrid stock exchanges.     

Simulation of alternative regulations in the Colombian electricity market

The deregulation of the Colombian electricity system took place in 1994 and the pool started operations in 1995. The Colombian system adopted a capacity charge mechanism to increase incentives to invest in new capacity. The capacity charge was showing strength, and apparently driving investments during the initial years. However, the mechanism started to exhibit weaknesses in terms of transparency and disincentives, causing a negative effect on investments. Different authors have presented alternative regulatory options to update the system. A non-standard system dynamics approach to evaluate alternative regulation schemes for the Colombian electricity market is proposed. A specific regulation problem is undertaken to illustrate the proposed methodology. It shows how the capacity charge mechanism, which has been used for reliability purposes, might be changed for alternative schemes. The proposed transformations to the actual regime seem to overcome some of its drawbacks. Simulation results indicate these alternatives improve the general system behaviour. In addition, the underlying model has been used afterwards for other energy policy purposes.     

Asset market response to monetary policy news from SNB press releases

This paper analyses the effects of Swiss National Bank (SNB) communication on asset prices. It distinguishes between different monetary policy news contained in press releases following a monetary policy decision. Employing a latent variable approach and event-study methods, I find that medium- and long-term bond yields respond to changes in the communicated inflation and GDP forecasts as well as to the degree of pessimism expressed in press releases. Exchange rates mainly react to changes in the GDP forecast while stocks do not react to SNB communication on monetary policy announcement days. Additionally, short-term expectations about the future path of the policy rate are driven by the communicated inflation forecast. The results underline the role of qualitative news beyond quantitative forecasts in influencing market expectations and asset prices.     

Franchise and the transport market: a new threat from Brussels

Contrary to the general liberalisation of transport policy that has followed in the European Union for some years now, a proposal is circulating in the Council and Parliament that would reverse all the gains that have been achieved from deregulation of bus and train services. It would return effective decisions to'competent authorities'and it would drive out competent managers as they lost the freedom to manage.     

The effect of economic policy uncertainty on China’s housing market

This study examines the relationship between economic policy uncertainty (EPU) and housing price at the macro-level in China as a developing country. The empirical evidence indicates that EPU has a leading effect on China’s housing market. In general, the housing market is prosperous when economic policy is stable and there is a positive relationship between housing price variation and EPU, which means housing market risk grows under unstable economic policies in this developing economy. Moreover, economic policy variation affects low-amplitude changes in housing prices. A variation of policy uncertainty enhances the risk premium of the housing market. By contrast, the level of EPU influences high-amplitude changes in housing prices, which reflects the trend of EPU dominating China's housing market.     

European industry: the emerging market competitiveness challenge

As the global economy has become increasingly open to 'free' trade, European industry ‐ and, indeed, industry across the developed world ‐ has found itself faced with growing competition from low cost, emerging market countries. How is it facing up to this stiff challenge? Newspaper headlines may suggest that effort has been focused on raising trade barriers to keep competition at bay. However, such actions are a thin veneer over the very real, structural changes that are rapidly taking place. This article, by Grant Colquhoun, examines the changing structure of the EU15's trading patterns and the differential impact across manufacturing sectors. It then analyses the steps industry is taking to cope with the competitiveness challenge. As well as attempting to squeeze costs, it is clear that industry in Europe is restructuring in order to focus on higher value added activities, where it typically has a competitive advantage over emerging markets.     

The impact of China's stock market reforms on its international stock market linkages

This paper investigates how China's stock market reforms have affected the stock market linkages between China and Korea, Japan and the US respectively. We firstly use a 4 × 4 asymmetric GARCH-BEKK model and a series of likelihood ratio tests to uncover China's regional and global linkages between 1992 and 2010 and during three sub-periods representing the stages of the Chinese reforms. The results show that Chinese stock market is linked to these overseas markets and the reforms permit spillovers to these markets from China. The subsequent regression analyses of the time-varying conditional correlations, in the presence of growing economic integration, exchange rate risk and financial turbulence, further indicate that the interdependences between China and the regional markets increase due to the implementation of liberalisation policies. However, the correlation between China and the global market remains weak even though this correlation responds positively to the institutional reforms on China's stock market additionally.     

Fiscal policy and stock market efficiency: Evidence for the United States

This paper examines the extent to which fiscal policy actions affect the stock market's behavior for the US during 1968–2005. The findings are consistent with the hypothesis that past budget deficits negatively affect current stock returns thus suggesting that the market is inefficient with respect to information about future fiscal policy actions. One interpretation of this ‘disturbing’ result is that market participants do not place much faith on news about the budget deficits as they do not believe that deficits could adversely impact the stock market. Instead, what the market considers most important is news about monetary policy.     

REGIONALISM AND FREE-MARKET REFORM: THE CASE OF POLAND

In Poland, there is a widening gap between well-developed core regions and depressed peripheral ones. This article argues, on the one hand, that any EU- or government-funded assistance to less developed areas should be accompanied by nationwide liberalisation and, on the other, that lack of reform and increasing regional disparities might fuel discontent in the worst-off regions, which, in turn, might make politicians adopt a fully-blown interventionist policy.     

SWITZERLAND: GROWTH OF GOVERNMENT, GROWTH OF CENTRALISATION

Switzerland has a tradition of decentralised government, decentralised tax setting and direct reference to the voters through referendums. Such mechanisms should give rise to lower taxes, better provision of public goods and higher economic growth. However, these mechanisms have not been effective in the last 30 years at preventing the growth in government spending and centralisation. This is partly because of the consensus in favour of centralisation that exists among institutionalised politicians. The performance of the Swiss economy since 1970 has consequently been dismal. Real per capita post-tax incomes have been stagnant. There is now an opportunity for the growth of centralisation to be reversed.     

Technology transfer and the restructuring of science and technology in central and eastern Europe

Profound changes which have occurred in central and eastern Europe (CEE) have left science and technology systems in those countries in a dilapidated state. Reform efforts have focused on restructuring and privatising research institutes and promoting technology transfer between domestic institutions and between domestic and foreign institutions.¹ Both of these reform initiatives are aimed at increasing levels of innovation. Emphasis has been put on introducing the market mechanism. This paper looks at these reforms in CEE, particularly in Poland. The following broad points emerge: First, the track record of efforts to promote technology transfer need to be understood and interpreted in conjunction with a fuller understanding of institutional change, innovation and learning. Technology transfer is meant to encourage innovation, but a range of things need to happen if technology transfer initiatives are to work. Gibbons (Gibbons M. et al., 1994) observed, for example, that effective innovation requires new configurations of knowledge (and skills). The coordination activities required to effect these new configurations within and between organisations and institutions impose their own demands on actors engaged in technology transfer, which rapid privatisation or liberalisation policies in CEE do not begin to address. Reform policies which have focused on introducing new economic incentives need to address change at micro and meso levels. Creating new institutional practice depends not only on creating economic incentives but on wider reform processes, such as creating new organisational practices and encouraging the emergence of new sorts of institutions which can facilitate links. Second, the reform process is a social and political one. Changing the emphasis of policy towards technological development requires a change in power relations so that technological development and innovation, rather than success in science, are prioritised. These political battles greatly influence the pace and nature of change, and in CEE the promotion of technology and innovation is taking place in a context of social upheaval. Social consequences of reform in general and in science and technology in particular are difficult and uncomfortable, and change in this area is perhaps not yet a political priority in some CEE countries.     

Unification of Dual Foreign Exchange Markets

In this paper I investigate the impact of overnight floating of the official rate and easing foreign exchange restrictions on post-unification domestic inflation rate. After analysing the behaviour of an economy under dual foreign exchange markets, an official market with a crawling foreign exchange rate and a free illegal parallel market. The paper also shows that maintaining a unified free exchange rate depends on the degree of foreign exchange restrictions under dual foreign exchange system and on the level of the official reserve that prompts foreign exchange liberalisation policy. This revised version was published online in July 2006 with corrections to the Cover Date.     

Immigration policy and market institutions in liberal market economies

This article examines how the regulatory character of market institutions shapes government responses to labour shortages, with particular reference to immigration policy. The period between the late 1990s and the late 2000s saw many advanced economies relax entry controls on select categories of foreign workers. This trend was most pronounced among states with liberal market institutions. The underlying reasons for these trends are analysed through an examination of the motivations for reform in Australia and the UK, two states that oversaw significant liberalisations of their labour immigration policies. It argues that the liberal character of key market institutions encouraged firms in these states to look to external rather than internal solutions for meeting their labour requirements. These findings suggest that perspectives from the comparative political economy scholarship, most notably the varieties of capitalism literature, may provide insights into the way that different modes of market regulation shape immigration policy preferences.     

Deregulation and liberalization of the Chinese stock market and the improvement of market efficiency

This study employs single and multiple variance ratio tests to reexamine the weak-form efficient market hypothesis (EMH) of A- and B-shares on the Shanghai and Shenzhen exchanges in Chinese stock market. The study also examines the influence of the release of investment restriction of B-share markets on market efficiency. For the whole sample period, the weak-form EMH is only supported for Shanghai A-shares, and is not supported for the remaining shares. For the sub-sample period, the Shenzhen A-share and B-shares of both exchanges being rejected for the weak-form EMH in the earlier sample period are supported following the regulatory change. Rolling multiple variance ratio test statistic values provide additional evidence of weak-form EMH. The improvement of market efficiency can be explained by the increased liquidity and maturity accompanying deregulation and liberalization.     

Capital market reactions to earnings announcements: empirical evidence on the difference in the information content of IAS-based earnings and EC-Directives-based earnings

Listing on a foreign stock exchange and the aim to attract international investors usually forces European quoted companies to adapt information supplied in financial statements to different information needs of international investors. Because of the dominance of the American stock market, this adaptation raises especially the question whether Anglo-American-oriented accounting standards (for instance IAS — International Accounting Standards) convey a higher information content for investors than continental-Europe-oriented accounting standards (for instance EC-Directives). The study examines the information content of earnings announcements, i.e. abnormal returns resulting from un-expected earnings, for a sample of Swiss quoted companies which have changed the accounting standard used for presenting Swiss GAAP consolidated financial statements to either EC-Directives or IAS and can therefore contribute to this discussion. The results of the study suggest that IAS-based earnings announce-ments convey a statistically significant higher information content than earnings announcements based on the Swiss GAAP if a variance-approach is used. For investors in the Swiss capital market, the switch from Swiss GAAP to IAS has therefore increased the information content of financial statements. But comparing IAS-based and EC-Directives-based earnings announcements, the results suggest that for investors IAS-based earnings do not possess a statistically significant higher information content than EC-Directives-based earnings. This result has been achieved despite the fact that for Swiss financial analysts financial statements based on IAS convey a significant higher information content than financial statements based on EC-Directives. Avoiding problems in specifying a model for unexpected earnings by standardizing the mean of the abnormal returns of each event window to a positive value does not lead to a different conclusion if the variance approach is used.     

Order aggressiveness, pre-trade transparency, and long memory in an order-driven market

Recent empirical research has documented that the state of the limit order book influences stock investors' strategies. Investors place more aggressive orders when the same side of the order book is thicker, and less aggressive orders when it is thinner. We conjecture and demonstrate that this behavior is related to long memories of trading volume, volatility, and order signs in stock markets. We investigate our conjecture in two types of artificial stock markets: a transparent market, in which agents observe all limit orders on both sides of the book and order volumes at those prices before they trade; and a less transparent market, in which agents observe only the best five bid and ask quotes with the depth available at these limit prices. The first market structure resembles certain actual stock exchanges in the level of pre-trade transparency, such as the Australian Stock Exchange, NYSE OpenBook, and the London Stock Exchange, whereas the second market structure is consistent with stock exchanges such as Euronext Paris, the Toronto Stock Exchange, the Tokyo Stock Exchange, and Hong Kong Exchanges and Clearing. We demonstrate that our long memory results are robust with different levels of pre-trade transparency, implying that the strategy constructed by the state of the order book is key for explaining long memories in many actual stock exchanges.     

ARE OFFICIAL POVERTY STATISTICS NECESSARY?

Caritas Switzerland has recently criticised the country's lack of official poverty statistics in strong terms, and called for the introduction of internationally accepted poverty measures. However, the fact that these measures are widely used is not a testimony to their reliability, which is more than questionable. It appears that Caritas Switzerland is actually seeking some empirical support for the interventionist social policies it supports. Given the success of Switzerland's decentralised social policies, the recommendation that the country should abandon its tradition and become a conventional European social democracy is surprising.     

The historical development of the Swiss rental market – A new price index

A new data set is employed to construct an index of the Swiss rental residential market starting as early as 1936. Given the data sample at our disposal of slightly less than 1000 paired data points spread across all Switzerland, we focus on using the most efficient type of repeated-measurement index to evaluate the yearly price development of the rental property market. In the process of building the index, an alternative of the SPAR method (Sale Price Appraisal Ratio) is developed and compared against a structural time series model and the Case–Shiller approach. The newly developed ISPAR (Inverse SPAR) method yields qualitatively similar results to the regression based methodology yet is influenced to a lesser extent by the sample size. The structural time series model is the version least influenced by the sample size. An interesting finding in our sample is that despite the large time span between successive price measurements, no notable improvement is obtained using the 3SLS method of Case–Shiller instead of the traditional Bailey et al. method.