Analysis of an unannounced foreign exchange regime change

Starting in 2004 the Guyanese foreign exchange rate has been remarkably stable relative to earlier periods. This paper explores the reasons for the stability of the rate. First, the degree of concentration in the foreign exchange market has increased, thus making the task of moral suasion relatively straightforward once this policy tool comes to bear on the dominant trader(s). Second, long-term or non-volatile capital inflows make the exchange rate less susceptible to sudden reversal. Third, commercial banks, the dominant foreign exchange traders, have large outlays of assets in domestic currency, thus their desire for exchange rate stability. The econometric exercise is consistent with the notion that trader market power has contributed to lower volatility in the G$/US exchange rate. The paper also presents a model that analyzes monetary policy effects in the presence of a mark-up or threshold interest rate.     

Do core-selecting Combinatorial Clock Auctions always lead to high efficiency? An experimental analysis of spectrum auction designs

For many years the Simultaneous Multi-Round Auction (SMRA) has been the primary auction design for spectrum sales worldwide. Recently, the core-selecting Combinatorial Clock Auction (CCA) has been used as an alternative to the SMRA in a number of countries promising strong incentives for truthful bidding and high efficiency as a result. We analyze the efficiency and auctioneer revenue of the CCA in comparison to SMRA and examine bidding behavior in both formats. The experiments are based on two value models, which resemble single- and multiband spectrum sales in the field. Such applications often allow for thousands of possible bundles. Bidders in the CCA submitted bids for only a fraction of all bundles with a positive valuation. Bundles were selected based on synergies and payoff after the primary bid rounds. As a consequence, we found efficiency of the CCA to be significantly lower than that of SMRA in the multi-band value model and auctioneer revenue of the CCA to be lower in both value models. In addition, we characterize several properties of the auction format, which result from the two-stage design and the payment and activity rules.     

The case for heterogeneity of cities

The general similarity of the results of comparative statics in a semiclosed and in a fully closed city have been demonstrated by Pines and Sadka (Journal of Urban Economics 20, 1–20, 1986). The objective of this paper is to determine if the consequences of different forms of public regulation of the urban land market are also invariant with respect to the type of city. The conclusion is that while there are well-defined consequences of such controls on metropolitan area and land values in a semiclosed city, the impacts in a fully closed city are generally ambiguous. Therefore, proposals for the introduction of zoning and density regulation have to be city-specific and take into consideration the pattern of land ownership and the extent of leakage of urban land rent income.     

Spectrum auction design: Simple auctions for complex sales

Following the successful PCS Auction conducted by the US Federal Communications Commission in 1994, auctions have replaced traditional ways of allocating valuable radio spectrum. Spectrum auctions have raised hundreds of billion dollars worldwide and have become a role model for market-based approaches in the public and private sectors. The PCS spectrum was sold via a simultaneous multi-round auction, which forces bidders to compete for licenses individually even though they typically value certain combinations. This exposes bidders to risk when they bid aggressively for a desired combination but end up winning an inferior subset. Foreseeing this possibility, bidders may act cautiously with adverse effects for revenue and efficiency. Combinatorial auctions allow for bids on combinations of licenses and thus hold the promise of improved performance. Recently, a number of countries worldwide have switched to the combinatorial clock auction to sell spectrum. This two-stage auction uses a core-selecting payment rule. The number of possible packages a bidder can submit grows exponentially with the number of licenses, which adds complexity to the auction. For larger auctions with dozens of licenses bidders cannot be expected to reveal all their valuations during such an auction. We analyze the impact of two main design choices on efficiency and revenue: simple “compact” bid languages versus complex “fully expressive” bid languages and simple “pay-as-bid” payment rules versus complex “core-selecting” payment rules. We consider these design choices both for ascending and sealed-bid formats. We find that simplicity of the bid language has a substantial positive impact on the auction?s efficiency and simplicity of the payment rule has as a substantial positive impact on the auction?s revenue. The currently popular combinatorial clock auction, which uses a complex bid language and payment rule, achieves the lowest efficiency and revenue among all treatment combinations.