Strategic wage setting, inflation uncertainty and optimal delegation

The paper examines optimal monetary policy delegation in an economy where wages are set strategically by a single economy-wide union whose objectives relate to employment and the real wage. Crucially, the central bank exerts imprecise control over inflation, giving rise to a positive relationship between the mean value of inflation and its variance. In this context, union concerns with regard to the employment goal render equilibrium sensitive to the conduct of monetary policy. As a consequence, optimal delegation arrangements closely resemble those identified as optimal in models that assume a direct aversion to inflation on the part of unions.     

How financial intermediation impacts on financial stability?

The great financial crisis widened the role of financial intermediation in financial stability. This study develops a new financial intermediation variable, credit cash flow (CCF), which enables measurement of the net financial flow resulting from loan activity. An analysis provides evidence that CCF affects the capital buffer via credit gap behaviour, thus indicating the existence of a channel between the CCF and the capital buffer. Such a link offers the policy-maker the possibility to monitor the behaviour of financial intermediation carried out by banks, in order to avoid the outbreak of financial instability events.     

Rethinking the allocation of macroprudential mandates within the Banking Union – a perspective from east of the BU

This paper argues that reforms of the Banking Union should be aimed at increasing efficiency of the single market as well enhance financial stability in the European Union. We argue that this can only be achieved if the Banking Union becomes more accommodative to non-Eurozone Central and Eastern European countries. It can be achieved if within BU institutions, the allocation of competencies reflects the subsidiary demands of CEE governments. Using the example of macroprudential regulation, we develop a number of reform options that could result in the better functioning of the Single Supervisory Mechanism and thus benefit all EU member states.     

The European Systemic Risk Board – governance and early experience

ABSTRACT

The European Systemic Risk Board is charged with the macroprudential oversight of the financial system in the European Union. We compare and contrast the ESRB with the U.S. National Transportation Safety Board, which some scholars proposed as a role model for systemic risk management. There are parallels and some differences between these organisations. Neither institution has direct regulatory power, which could paradoxically be beneficial as it may help preserve their independence and objectivity in the long run. We also review the ESRB’s activities after it started in 2010 and assess the effect of its first public recommendation.     

Response to Shuklian

The Alaska Gasline Inducement Act (AGIA) was enacted by the State of Alaska in 2007 in an attempt to progress the construction of a natural gas pipeline from the Alaska North Slope to North American markets. The Act conveys monetary inducements from the state to the exclusive licensee in exchange for certain performance requirements. The financing of any pipeline requires the contractual commitment from the shippers (producers) to pay to ship the gas over an extended period of time. However, many of the performance requirements of AGIA are antithetical to the commercial interests of the shippers. A flawed financial analysis of the project by the administration overstated the economic vitality of the project, and hence understated the severity of the commercial issues. Consequently, the prospects for success in getting a pipeline constructed appear doubtful.     

Cooperation by way of support in a rent seeking contest for a public good

This paper analyzes the efforts made to influence a decision that can have two outcomes. First, the agents on the same side designate an agent to play the contest for them. The inactive agents can then decide to support this active agent, i.e. pay a percentage of his effort. It is optimal to designate either the agent with the lowest stake (who will receive support from everyone else) or the agent with the highest stake (who will not receive support) as the active agent. We find that the side with the higher aggregate stake may have the lower success probability.     

What policies to combat labour informality? Evidence from Mexico

Informality often concerns policymakers due to its negative implications on productivity and poverty. In recent years, the extent of informal employment has diverged across Mexican states. Varying informal employment dynamics within a comparable institutional environment offers scope to identify policies that can reduce informality. This paper uses cross-state panel and individual data to examine the determinants of informal employment, exploiting the diverging outcomes across states, industries and time. The results suggest that there is no ‘silver bullet’ to combat informality, yet a package of policies promoting labour skills, encouraging foreign investment, enhancing tax enforcement and deterring corruption can reduce informal employment. Intriguingly, reducing the cost to start a business is found to have a non-linear effect on informal employment, conditional on the prevalence of microenterprises.     

Uncertainty and the Choice of Policy Instruments: A Note On Baumol and Oates Propositions

Baumol and Oates' propositions, the irrelevancy of benefit uncertainty and the importance of cost uncertainty on the choice between a tax and a system of marketable permits, are limited to a large-number case in which the opportunities for victims of pollution to participate in a permit market are non-existent. However, with the evolution of environmental groups and coalitions of victims in neighborhoods, the large-number case can easily transform into a small-number case. This paper shows that when the pollution standard, set at what appears to be optimal ex ante, is excessively lenient, the system of marketable permits offers such groups a flexibility to buy pollution permits in a competitive market and destroy them until the optimal solution is realized. In the reverse situation, however, Baumol and Oates propositions are unambiguously valid.     

Regulation of Mobile Telephony across the European Union: An Empirical Analysis

In this paper I analyze the impact of regulatory policy on prices and demand for mobile telecommunications services across the European Union. I estimate a reduced form model of the mobile industry using panel data for the EU countries from 1998 to 2002. Among others, I find the following effects: liberalization of fixed telephone lines has a negative impact on prices and a positive impact on the demand for mobile services, and the introduction of mobile number portability has a negative impact on prices.*I am grateful to Toker Doganoglu, Gerd Hansen, Eric Kodjo Ralph, Guido Friebel, participants at the 30th EARIE Conference 2003, the 2nd International Industrial Organization Conference 2004 and the 19th Annual Congress of the EEA 2004, and anonymous referees for valuable comments. I would like to acknowledge the generous financial support from the Volkswagen Stiftung and the Munich Graduate School of Economics which made this research possible. All errors are mine.1 Source: European Commission (1994).     

Do Competing Health Insurance Licensors Provide Pro-patient Effects?

This paper shows that competition among health insurance licensors has strong pro-patient effects, if inter-regulatory competition is allowed. The pro-patient effects of the competition among health insurance licensors do not depend on the need for the patients to form or exercise their political influence, such as, forming cooperatives or voting, as suggested by Backer's pressure group theory. When inter-jurisdictional transactions are allowed, endogenous policy making ensures that the health care licensors pursue public interests at no costs to patients.     

美国信用评级业及其未来的监管政策调整

美国次贷危机的爆发使得信用评级机构声誉日下,同时也使得美国信用评级业存在的问题进一步暴露.金融创新背景下的美国信用评级业其实存在着许多内在矛盾和困境.因此,以下三个方面将是其监管政策调整的重点: (1)强化竞争机制,调整信用评级现有市场结构; (2)加强信息披露,提高评级活动的可审核性; (3)保证评级活动的独立性,促使评级结果的公正与客观.