The Application of Monoline Insurance Principles to the Reregulation of Investment Banks and the GSEs

This article explores the benefits of reregulating the investment banks and government-sponsored enterprises (GSEs, namely, Fannie Mae and Freddie Mac) by applying the monoline principle that has been long established in regulating insurers that offer coverage against mortgage and bond default risks. The monoline regulatory principle was created to ensure that losses on a risky insurance line would not endanger other safe lines. The principle is applicable to both investment banks and the GSEs because both sets of institutions have operated with two basic divisions: a hedge fund division that maintained a highly risky investment portfolio and an infrastructure division that carried out activities with high direct value for the overall financial or mortgage markets. The monoline principle involves placing the two divisions in a new regulatory structure whereby the infrastructure division is bankruptcy remote from any losses that might occur within the hedge fund division.     

Fair Trade Standards,Corporate Participation,and Social Movement Responses in the United States

This article examines the development of and contestation over the standards for certified fair trade, with particular attention to the U.S. context. It charts fair trade’s rapid growth in the United States since the 1999 advent of formal certification, explores the controversies generated by the strategy of market mainstreaming in the sector, and focuses on five key issues that have generated particularly heated contention within the U.S. fair trade movement. It offers a theoretical framework based in the literatures on agrifood systems, social movements, and public-choice economics, for understanding the corporate response to alternative markets such as fair trade. The article suggests a typology of responses by social movement actors to this increased corporate participation, and assesses the relevance of the U.S. case for the future prospects of fair trade, both in other national contexts and as an international movement.     

Understanding Developing Country Strategic Responses to the Enhancement of Food Safety Standards

This paper explores the competing concepts of ‘standards as barriers’ and ‘standards as catalysts’ in the context of food safety standards in international trade in agricultural and food products. Through a review of existing evidence of the impact of food safety standards on developing country exports of agricultural and food products and the results of a series of country‐ and product‐specific case studies, it is suggested that food safety standards can act as both a barrier to trade and the basis of competitive positioning for developing countries in international markets. This suggests that broad conclusions about the trade effects of food safety standards on developing countries are problematic, rather the level and ways in which agricultural and food exports are impacted can be product, country, standard and even firm‐specific.     

Pricing and Capital Allocation for Multiline Insurance Firms

We study multiline insurance companies with limited liability. Insurance premiums are determined by no‐arbitrage principles. The results are developed under the realistic assumption that the losses created by insurer default are allocated among policyholders following an ex post, pro rata, sharing rule. In general, the ratio of default costs to expected claims, and thus the ratio of premiums to expected claims, vary across insurance lines. Moreover, capital and related costs are allocated across lines in proportion to each line's share of a digital default option on the insurer. Our results expand and generalize those derived elsewhere in the literature.     

Investment effects of departures from governmental present-value budget balance

The paper investigates whether departures from government borrowing constraints affect the relationship between fiscal-policy innovations and changes in the investment level. ‘Break points’, or apparent departures from present-value budget balance, are then identified. Next, the investment-deficit relationship is examined prior to and following identified break points in an effort to detect potential changes in behaviour. The investment-deficit relationship is quantified by examining posterior coverage bounds of impulse response functions. Britain appears to undergo such a break around 1973. Data from this country suggest that significantly more crowding out occurred following the identified breaks: in contrast, data from other comparison countries that do not appear to have experienced breaks indicate stable investment-deficit relationships.