The Business Models and Economics of Peer-to-Peer lending. ECRI Research Report No 17, May 2016

This paper reviews peer-to-peer (P2P) lending, its development in the UK and other countries, and assesses the business and economic policy issues surrounding this new form of intermediation. P2P platform technology allows direct matching of borrowers’ and lenders’ diversification over a large number of borrowers without the loans having to be held on an intermediary balance sheet. P2P lending has developed rapidly in both the US and the UK, but it still represents a small fraction, less than 1%, of the stock of bank lending. In the UK – but not elsewhere – it is an important source of loans for smaller companies. We argue that P2P lending is fundamentally complementary to, and not competitive with, conventional banking. We therefore expect banks to adapt to the emergence of P2P lending, either by cooperating closely with third-party P2P lending platforms or offering their own proprietary platforms. We also argue that the full development of the sector requires much further work addressing the risks and business and regulatory issues in P2P lending, including risk communication, orderly resolution of platform failure, control of liquidity risks and minimisation of fraud, security and operational risks. This will depend on developing reliable business processes, the promotion to the full extent possible of transparency and standardisation and appropriate regulation that serves the needs of customers.

Europe cannot afford people in bad health - Economics of health and care as a guide for investments. EPC Commentary, 4 July 2016

It is widely accepted that a new way of looking at Europe’s health sector is necessary if we are to maintain universal health coverage. Financial resources are limited, and the sustainability of Europe’s health systems is under threat. Economic growth is slow, health expenditures outpace GDP growth, public budgets are under strain and demographics – with a growing aging population – are putting pressure on the younger tax-paying generations. In an effort to ensure the sustainability of Europe’s health systems, reforms, underpinned by a new understanding of the economic value of health for individuals and society is needed.

First steps towards into the unknown. The possibilities prospects of unconventional gas extraction in Ukraine. OSW Commentary No. 106, 2013-04-24

Ukraine’s deposits of unconventional gas (shale gas, tight gas trapped in non-porous sandstone formations, and coal bed methane) may form a significant part of Europe’s gas reserves. Initial exploration and test drilling will be carried out in two major deposits: Yuzivska (Kharkiv and Donetsk Oblasts) and Oleska (Lviv and Ivano-Frankivsk Oblasts), to confirm the volume of the reserves. Shell and Chevron, respectively, won the tenders for the development of these fields in mid 2012. Gas extraction on an industrial scale is expected to commence in late 2018/ early 2019 at the earliest. According to estimates presented in the draft Energy Strategy of Ukraine 2030, annual gas production levels may range between 30 billion m3 and 47 billion m3 towards the end of the next decade. According to optimistic forecasts from IHS CERA, total gas production (from both conventional and unconventional reserves) could reach as much as 73 billion m3. However, this will require multi-billion dollar investments, a significant improvement in the investment climate, and political stability. It is clear at the present initial stage of the unconventional gas extraction project that the private interests of the Ukrainian government elite have played a positive role in initiating unconventional gas extraction projects. Ukraine has had to wait nearly four decades for this opportunity to regain its status of a major gas producer. Gas from unconventional sources may lead not only to Ukraine becoming self-sufficient in terms of energy supplies, but may also result in it beginning to export gas. Furthermore, shale gas deposits in Poland and Ukraine, including on the Black Sea shelf (both traditional natural gas and gas hydrates) form a specific ‘European methane belt’, which could bring about a cardinal change in the geopolitics and geo-economics of Eastern and Central Europe over the next thirty years.

The known unknowns and the unknown unknowns of the EMU. Bruegel Policy Contribution 2012/18, October 2012

Extensive prior research on the economics of European monetary union highlighted some potential risks (the known unknowns) but overlooked others (the unknown unknowns). Asymmetries among participating countries, the potentially destabilising character of a one-size-fits all monetary policy, the weakness of adjustment mechanisms, the lack of incentives for fiscal discipline, the possibility of sovereign solvency crises and their adverse consequences were all known and understood. But policymakers often relied on a complacent reading of the evidence. • The potential for financial disruption was vastly underestimated. Economists generally did not consider, or underestimated, the possibility of balance of payment crises such as those experienced by southern European countries, or the risk of a feedback loop between banks and sovereigns. • Remedying EMU’s systemic deficiencies is on the policy agenda. Banking union would go a long way towards addressing the fault lines. The urgent question for economists is if it is going to be enough and, if not, what else should complement the ‘bare-bones’ EMU of Maastricht.

Subsidiarity between Law and Economics. Research Papers in Law, 1/2005

From the Introduction. The present contribution is an attempt to raise awareness between the 'trenches' by juxtaposing the two approaches to subsidiarity. Subsequently, I shall set out why, in economics, subsidiarity is embraced as a key principle in the design and working of the Union and how a functional subsidiarity test can be derived from this thinking. Throughout the paper, a range of illustrations and examples is provided in an attempt to show the practical applicability of a subsidiarity test. This does not mean, of course, that the application of the test can automatically "solve" all debates on whether subsidiarity is (not) violated. What it does mean, however, is that a careful methodology can be a significant help to e.g. national parliaments and the Brussels circuit, in particular, to discourage careless politicisation as much as possible and to render assessments of subsidiarity comparable throughout the Union. The latter virtue should be of interest to national parliaments in cooperating, within just six weeks, about a common stance in the case of a suspected violation of the principle. The structure of the paper is as follows. Section 2 gives a flavour of very different approaches and appreciation of the subsidiarity principle in European law and in the economics of multi-tier government. Section 3 elaborates on the economics of multi-tier government as a special instance of cost / benefit analysis of (de)centralisation in the three public economic functions of any government system. This culminates in a five-steps subsidiarity test and a brief discussion about its proper and improper application. Section 4 applies the test in a non-technical fashion to a range of issues of the "efficiency function" (i.e. allocation and markets) of the EU. After showing that the functional logic of subsidiarity may require liberalisation to be accompanied by various degrees of centralisation, a number of fairly detailed illustrations of how to deal with subsidiarity in the EU is provided. One illustration is about how the subsidiarity logic is misused by protagonists (labour in the internal market). A slightly different but frequently encountered aspect consists in the refusal to recognize that the EU (that is, some form of centralisation) offers a better solution than 25 national ones. A third range of issues, where the functional logic of subsidiarity could be useful, emerges when the boundaries of national competences are shifting due to more intense cross-border flows and developments. Other subsections are devoted to Union public goods and to the question whether the subsidiarity test might trace instances of EU decentralisation: a partial or complete shift of a policy or regulation to Member States. The paper refrains from an analysis of the application of the subsidiarity test to the other two public functions, namely, equity and macro-economic stabilisation.2 Section 5 argues that the use of a well-developed methodology of a functional subsidiarity test would be most useful for the national parliaments and even more so for their cooperation in case of a suspected violation of subsidiarity. Section 6 concludes.

Comparison of PRC and Vietnam's Responses to the Elimination of U.S. Textile and Apparel Quotas: Economic and Cultural Perspectives. ACES Working Paper No. 1, 2007

International trade in textiles and apparel has, as of January 1, 2005, been set free from the very intricate Multi-Fiber textile and apparel quota Arrangement (MFA). This event has raised many uncertainties about the new international trade climate and has placed enormous pressure on China as the expected clear cut beneficiary of this liberalization.' Other countries considered to be major contenders include Vietnam which also has a large population employed in the textile and apparel (T&A) sector. Since the old quota system had provided a certain degree of market certainty to competing T&A producers, will the new free trade environment lead to a shake out where mass producers with large economies of scale dominate the new reality? The removal of T&A quotas will create opportunities for Vietnam and China along with other developing countries, but it will also expose them to additional competition from each other. The outcome of this competition will depend on the demand in the US, the ability of the exporting countries to differentiate their exports and on their ability to transfer additional resources to expand domestic output in the direction of the new 'free market signals' and away from rent seeking objectives. Obviously, exporting countries that adjust to this new environment quickly will improve their competitiveness, and will be the new beneficiaries of a quota free international trade in textiles and apparel. This paper attempts to shed some light on the differences and similarities in the responses of Chinese and Vietnamese T&A sectors to this new environment. It first focuses on the demand side attempting to determine whether or not Chinese and Vietnamese T&A items, formally under quota control, are substitutes or compliments. On the supply side, the paper focuses on institutional differences between each country's T&A sectors, the different domestic government policies that have contributed to their growth and the unique cultural differences which will determine the future progress in each country's T&A sectors.

Federalist rhetoric or political tactics? The what, where, who, when and why of Juncker’s call for a common European army. EPC Commentary, 12 March 2015

In an interview with the German newspaper Welt am Sonntag on 8 March 2015, the President of the European Commission, Jean-Claude Juncker, strongly advocated a common European army to consolidate peace in Europe, react to security threats both within the continent and in its neighbourhood, defend European values vis-à-vis aggressive powers, notably Russia, and create economies of scale by consolidating demand for military equipment.