Research joint ventures and optimal R&D policy with asymmetric information

When to allow Research Joint Ventures (RJVs) or not is an importantinstrument in the development of an optimal R&D policy. Theregulator, however, is unlikely to know all the relevant informationto regulate R&D optimally. The extent to which there existappropriability problems between the firms is one such variable thatis private information to the firms in the industry. In a duopolysetting we analyze the characteristics of a second-best R&D policywhere the government can either allow RJVs or not and give lump-sumsubsidies to the parties involved. The second-best R&D policy withoutsubsidies will either block some welfare improving RJVs or allow somewelfare reducing ones. With lump-sum subsidies, the second-best policytrades off the expected subsidy cost with allowing welfare decreasingRJVs or blocking welfare increasing ones.

Pharmaceutical generics, vertical product differentiation and public policy

This paper studies oligopolistic competition in off-patent pharmaceuticalmarkets using a vertical product differentiation model. This model canexplain the observation that countries with stronger regulations havesmaller generic market shares. It can also explain the differences inobserved regulatory regimes. Stronger regulation may be due to a higherproportion of production that is done by foreign firms. Finally, a closelyrelated model can account for the observed increase in prices by patentowners after entry of generic producers.

Corporate criminal law and organization incentives: A managerial perspective

Corporate criminal liability puts a serious challenge to the economictheory of enforcement. Are corporate crimes different from other crimes?Are these crimes best deterred by punishing individuals, punishing corporations, or both? What is optimal structure of sanctions? Shouldcorporate liability be criminal or civil? This paper has two majorcontributions to the literature. First, it provides a common analyticalframework to most results presented and largely discussed in the field.In second place, by making use of the framework, we provide new insightsinto how corporations should be punished for the offenses committed bytheir employees.

Endogenous policy leads to inefficient risk sharing

We analyze risk sharing and fiscal spending in a two-region model withcomplete markets. Fiscal policy determines tax rates for each state ofnature. When fiscal policy is decentralized, it can be used to affect prices of securities. To manipulate prices to their beneffit, regionschoose pro-cyclical fiscal spending. This leads to incomplete risk sharing,despite the existence of complete markets and the absence of aggregaterisk. When a fiscal union centralizes fiscal policy, securities pricescan no longer be manipulated and complete risk sharing ensues. If regionsare homogeneous, median income residents of both regions prefer the fiscalunion. If they are heterogeneous, the median resident of the rich regionprefers the decentralized setting.

Monetary policy shocks and transmission in Italy: A VAR analysis

This paper provides updated empirical evidence about the real and nominal effects of monetary policy in Italy, by using structural VAR analysis. We discuss different empirical approaches that have been used in order to identify monetary policy exogenous shocks. We argue that the data support the view that the Bank of Italy, at least in the recent past, has been targeting the rate on overnight interbank loans. Therefore, we interpret shocks to the overnight rate as purely exogenous monetary policy shocks and study how different macroeconomic variables react to such shocks.

Optimal bail out policy, conditionality and constructive ambiguity

This paper addresses the issue of the optimal behaviour of the Lender of Last Resort (LOLR) in its microeconomic role regarding individual financial institutions in distress. It has been argued that the LOLR should not intervene at the microeconomic level and let any defaulting institution face the market discipline, as it will be confronted with the consequences of the risks it has taken. By considering a simple costbenefit analysis we show that this position may lack a sufficient foundation. We establish that, instead, uder reasonable assumptions, the optimal policy has to be conditional on the amount of uninsured debt issued by the defaulting bank. Yet in equilibrium, because the rescue policy is costly, the LOLR will not rescue all the banks that fulfill the uninsured debt requirement condition, but will follow a mixed strategy. This we interpret as the confirmation of the "creative ambiguity" principle, perfectly in line with the central bankers claim that it is efficient for them to have discretion in lending to individual institutions. Alternatively, in other cases, when the social cost of a bank's bankruptcy is too high, it is optimal for the LOLR to bail out the insititution, and this gives support to the "too big to fail" policy.

Economic booms, trade deficits and economic policy

Many economic booms have been accompanied by realexchange rate appreciations, large trade defcits -whichhave sometimes persisted after the return to the initialexchange rate parity- and a deteriorating traded sector.Those circumstances have typically raised the questionof the de-sirability of some stabilization policy. We show that the dynamics induced by an expectedproductivity shock in an economy where the capital stockis non-mobile across sectors, match those circumstances.Furthermore, we obtain that credit market imperfectionstend to exacerbate trade deficits, and to cause aninefficient capacity reduction in the traded sector.Some stabilization policies are explored.

Monetary policy in the Euro area: Lessons from 5 years of ECB and implications for Turkey

We examine monetary policy in the Euro area from both theoretical and empirical perspectives. We discuss what theory tells us the strategy of Central banks should be and contrasts it with the one employed by the ECB. We review accomplishments (and failures) of monetary policy in the Euro area and suggest changes that would increase the correlation between words and actions; streamline the understanding that markets have of the policy process; and anchor expectation formation more strongly. We examine the transmission of monetary policy shocks in the Euro area and in some potential member countries and try to infer the likely effects occurring when Turkey joins the EU first and the Euro area later. Much of the analysis here warns against having too high expectations of the economic gains that membership to the EU and Euro club will produce.

CRIMINAL JUSTICE, VICTIM SUPPORT CENTERS, AND THE EMOTIONAL WELLBEING OF CRIME VICTIMS

SUMMARY (Français au-dessous)After the Second World War, the role of the victim in criminal conflict became an objectof interest for academics. But it was only in the 1960s that the importance of providingprotection and assistance to crime victims was highlighted in particular by the victims'movement, which inaugurated a new era of criminal justice in systems throughout the world.Moving beyond just the role of controlling crime and punishing the offender, the criminaljustice system also began to contribute to the victims' rehabilitation and to help the victim tomove on from the event psychologically and emotionally.Although some criminological research has been conducted, to date the effect that thecriminal justice system and victim support services have on the well-being of crime victims isstill uncertain.The current study sought to understand better the healing process of victims of crime, thepotential consequences of their participation on the criminal justice system, and the supportof victim centers. Moreover, it aimed to find out whether the existence of a Victim SupportAct would change the treatment that the victim receives in the criminal justice system. Thusthis research was conducted based in two countries - Switzerland and Brazil - where theoutcome of the victims' movement on the criminal justice system was different, as was theparticipation of the victim in the criminal justice system and the government's provision ofsupport.In order to conduct this research we employed the qualitative method, which is the mostefficient to gather sensitive information. Interviews with crime victims were the main sourceof information. Hearing observation and document research were used as complementarysources.The results of this research show that victims who have contact with the criminal justicesystem and victim services are not more likely to recover than those who had no contact. Thisis to say, the support offered has no major effects; the influence of the criminal justice systemand the victim support services in the emotional well-being of crime victims is rather neutral.However, considering that the sample is not representative, findings are not expected to begeneralized. Instead, findings may give insight to practitioners or to future criminal justicepolicy makers, suggesting what may work to improve the emotional well-being of crimevictims, as well as suggesting further studies.________________________________________________________________________________RÉSUMÉAprès la deuxième guerre mondiale, le rôle de la victime est devenu un objet d'intérêtpour les académiciens. Par contre, c'est seulement dans les années 60 que l'importance defournir de la protection et de l'appui aux victimes d'infractions a été accentuée, en particulierpar un mouvement ― victims' mouvement ―, qui a inauguré un nouveau temps dans lajustice pénale des systèmes juridiques du monde entier. A part la fonction de contrôler lecrime et de punir le délinquant, le système de justice pénale joue également un rôle dans laréhabilitation des victimes.Malgré la réalisation de plusieurs recherches criminologiques sur ce sujet, les effets que lesystème de la justice pénale et les centres d'aides aux victimes ont sur le bien-être desvictimes d'infractions est encore incertain.Ainsi cette étude cherche à mieux comprendre le processus de réhabilitation des victimesd'infraction, les conséquences de leur participation dans le système de justice pénale ainsique la portée de l'appui des centres d'aide. De plus, l'étude vise à découvrir si l'existenced'une loi d'aide aux victimes, particulièrement la Loi d'Aide aux Victimes d'InfractionsLAVI, est susceptible de changer le traitement que la victime reçoit dans le système de lajustice pénale. Pour cela, elle a été conduite dans deux pays - la Suisse et le Brésil - où lesconséquences du mouvement des victimes sur le système de la justice pénale a eu undéveloppement différent; il en va de même pour la participation de la victime dans laprocédure pénale et pour l'appui offert par l'Etat.Cette étude utilise la méthode qualitative qui est la plus efficace pour le recueild'informations sensibles. La plus importante source des données sont les interviews avec lesvictimes. L'observation des audiences et l'analyse de documents ont été utilisés en tant quesources d'information complementáire.Les résultats de cette recherche montrent que les victimes qui ont porté plainte et qui ontreçu l'appui des centres d'aides ne sont pas mieux rétablies que celles qui n'ont rien fait. C'estainsi que nous avons conclu que les services offerts n'ont aucune influence dans ce processus.Cependant, considérant que notre échantillon n'est pas représentatif, il n'est pas possible degénéraliser nos résultats. Néanmoins, ceux-ci peuvent éclairer les praticiens ou les futursdécideurs politiques de la justice pénale, suggérant ce qui peut fonctionner pour lerétablissement des victimes d'infraction, aussi bien que suggérer d'autres études.

The adverse effects of environmental policy in green markets

We model green markets in which purchasers, either firms orconsumers, have higher willingness-to-pay for lesspolluting goods. The effectiveness of pollution reductionpolicies is examined in a duopoly setting. We show thatduopolists' strategic behaviour may increase pollutionlevels. Maximum emission standards, commonly used in greenmarkets, improve the environmental features of products.Nonetheless, overall pollution levels will rise becausegovernment regulation also affects market shares and bootsfirms' sales. Consequently, social welfare may be reduced.We also explore the effects of technological subsidies andproduct charges, including differentiation of charges.

Monetary policy and exchange rate volatility in a small open economy

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to simple representation in domestic inflation and the output gap. We use the resulting framework to analyze the macroeconomic implications of three alternative rule-based policy regimes for the small open economy: domestic inflation and CPI-based Taylor rules, and an exchange rate peg. We show that a key difference amongthese regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules.

Should banking supervision and monetary policy tasks be given to different agencies?

This paper adds some new arguments to the thesis that the responsibility forbanking supervision should be assigned to an agency formally separated bythe Central bank. We also provide some additional evidence on the macroand microeconomic performance of OECD countries whose banking systems areclassified according to the regulatory regime in place. We find that theinflation rate is considerably higher and more volatile in countries wherethe Central bank acts as a monopolist in banking supervision. Besides,although banks seem to be more profitable when Central banks supervise them,they incur into higher costs and rely more on deposits with respect to moresophisticated liabilities as a funding source.The data are not definitively in favor of functional separation. However, we argue that the evolution of financial intermediaries, moral hazard problems and especially cost accountability seem to suggest that separation would be a better solution for industrialized countries.We also critically discuss the current arrangement of financial regulationand supervision in the EMU: our proposal is to establish an independentEuropean System of Financial Supervisors (ESFS) structured similarly to theESCB.

Macroeconomic modeling for monetary policy evaluation

We describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation. We point to some of the key differences with respect to the earlier generation ofmacro models, and highlight the insights for policy that these new frameworks have to offer. Our discussion emphasizes two key aspects of the new models: the significant role of expectations of future policy actions in the monetary transmission mechanism, and the importance for the central bank of tracking of the flexible price equilibrium values of the natural levels of output and the real interest rate. We argue that both features have important implications for the conduct of monetary policy.

The economics of organized crime and optimal law enforcement

This paper extends the optimal law enforcement literature to organized crime.We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents.In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.