A regional reserve fund for Latin America

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Macroprudential policy: an institutionalist interpretation

One of the consequences of the recent international economic crisis has been the demand for new economic policy tools, to add to the well-established monetary, exchange-rate, and fiscal policy mechanisms. In particular, more effective ways are needed to regulate the financial system and prevent the emergence of imbalances that affect the real economy. In that context, macroprudential policy has been singled out as another economic-type public policy which could help maintain financial stability. Nonetheless, the discussions and development of the literature on this topic are founded on pragmatic considerations that are not directly related to the orthodox or heterodox schools of economic thought. So the aim of this article is to provide an institutionalist reading of macroprudential policy, to understand it in terms of the theoretical content of institutional approaches.

The relationship between banking market competition and risk-taking: Do size and capitalization matter?

This paper addresses the effects of bank competition on the risk-taking behaviors of banks in 10 Latin American countries between 2003 and 2008. We conduct our empirical approach in two steps. First, we estimate the Boone indicator, which is a measure of competition. We then regress this measure and other explanatory variables on the banking "stability inefficiency" derived simultaneously from the estimation of a stability stochastic frontier. Unlike previous findings, this paper concludes that competition affects risk-taking behavior in a non-linear way as both high and low competition levels enhance financial stability, while we find the opposite effect for average competition. In addition, bank size and capitalization are essential factors in explaining this relationship. On the one hand, the larger a bank is, the more it benefits from competition. On the other hand, a greater capital ratio is advantageous for banks that operate in collusive markets, while capitalization only enhances the stability of larger banks under high and average competition. These results are of extreme importance when considering bank regulations, especially in light of the recent turmoil in the global financial markets. (C) 2012 Elsevier B.V. All rights reserved.

Mortgage securitization and its credit risk control

This dissertation concentrate on the mortgage securitization and its credit risk, which are criticized as the main causes of the financial crisis. From the point of the veiw of mortgage's evolution, the nature, structure and function of mortgage has been radically changed, yet the mortgage law did not give appropriate response to this market change. Meanwhile, the U.S legilslations facilitating the mortgage securitization also have rotten the legal foundations for mortgage market self-regulation and sustained development. In contrast, the EU covered bond system has kept financial stability for 200 years' time, and their statutory approach has been proved to be able to control the credit risk and incentive problems very well, in combination of market self-regulation and public regulation. So the future reform should be directed to strengthen the market's capacity of self-regulation and improve the public regulation. For the development of mortgage securitization in China, it is suggested to introduce the EU covered bond system for the reason of the equilibrium between funding efficiency and financial stability.

Banking Regulation in Turkey and Russia: An Economic Analysis

The importance of the banks and financial markets relies on the fact that they promote economic efficiency by allocating savings efficiently to profitable investment opportunities.An efficient banking system is a key determinant for the financial stability.The theory of market failure forms the basis for understanding financial regulation.Following the detrimental economic and financial consequences in theaftermath of the crisis, academics and policymakers started to focus their attention on the construction of an appropriate regulatory and supervisory framework of the banking sector. This dissertation aims at understanding the impact of regulations and supervision on banks’ performance focusing on two emerging market economies, Turkey and Russia. It aims at examining the way in which regulations matter for financial stability and banking performance from a law & economics perspective. A review of the theory of banking regulation, particularly as applied to emerging economies, shows that the efficiency of certain solutions regarding banking regulation is open to debate. Therefore, in the context of emerging countries, whether a certain approach is efficient or not will be presented as an empirical question to which this dissertation will try to find an answer.

Risk appetite e risk tolerance: strumenti di supporto agli istituti di credito per l'assunzione di rischi in tempi di crisi

Negli ultimi anni l’attenzione di legislatori e degli Organi di Vigilanza, in base alle riforme regolamentari attivate in risposta alla crisi economica, si sono focalizzate sulle pratiche di risk management delle Banche, sottolineando l’importanza dei sistemi di controllo e gestione dei rischi. Il presente lavoro nasce con l’intento di analizzare e valutare le caratteristiche salienti del processo di assunzione e gestione dei rischi nel sistema economico finanziario attuale. Numerosi e autorevoli esperti, come gli operatori del Financial Stability Board , Institute of International Finance e Senior Supervisory Group, si sono espressi sulle cause della crisi finanziaria ed hanno sollevato dubbi circa la qualità delle azioni intraprese da alcuni manager, sulle loro politiche gestionali e sulla comprensione delle reali condizioni in cui versavano le loro Banche (in termini di esposizione ai rischi, report da aggregazione dati su performance aziendali e qualità dei dati aggregati) , si è ritenuto giusto dal punto di vista teorico approfondire in particolare i temi del Risk Appetite e Risk Tolerance, novità introdotte nelle diverse direttive e normative in risposta alle citate ed ambigue politiche di gestione ed assunzione rischi. I concetti, qui introdotti, di appetito e tolleranza al rischio conducono ad una ampia sfera di riferimento che guarda alla necessità di fissare degli obiettivi di rischio e loro limiti per poter meglio controllare e valutare la stabilità economica/finanziaria e stimare gli effetti di condizioni peggiorative (reali o soltanto teoriche, come gli stress test) sulla solvibilità e profittabilità delle Banche nazionali ed internazionali. Inoltre, ad integrazione di quanto precedentemente esposto sarà illustrata una survey sulla disclosure delle principali Banche europee in relazione alle informazioni sul Risk Appetite e sul Risk Tolerance.

Essays in Macroeconomics

The dissertation consists of four papers that aim at providing new contributions in the field of macroeconomics, monetary policy and financial stability. The first paper proposes a new Dynamic Stochastic General Equilibrium (DSGE) model with credit frictions and a banking sector to study the pro-cyclicality of credit and the role of different prudential regulatory frameworks in affecting business cycle fluctuations and in restoring macroeconomic and financial stability. The second paper develops a simple DSGE model capable of evaluating the effects of large purchases of treasuries by central banks. This theoretical framework is employed to evaluate the impact on yields and the macroeconomy of large purchases of medium- and long-term government bonds recently implemented in the US and UK. The third paper studies the effects of ECB communications about unconventional monetary policy operations on the perceived sovereign risk of Italy over the last five years. The empirical results are derived from both an event-study analysis and a GARCH model, which uses Italian long-term bond futures to disentangle expected from unexpected policy actions. The fourth paper proposes a DSGE model with an endogenous term structure of interest rates, which is able to replicate the stylized facts regarding the yield curve and the term premium in the US over the period 1987:3-2011:3, without compromising its ability to match macro dynamics.

The Law and Economics of Hedge Fund Regulation: A Comparison between the U.S. and the EU

This doctoral dissertation seeks to assess and address the potential contribution of the hedge fund industry to financial instability. In so doing, the dissertation investigates three main questions. What are the contributions of hedge funds to financial instability? What is the optimal regulatory strategy to address the potential contribution of hedge funds to financial instability? And do new regulations in the U.S. and the EU address the contribution of hedge funds to financial instability? With respect to financial stability concerns, it is argued that despite their benefits, hedge funds can contribute to financial instability. Hedge funds’ size and leverage, their interconnectedness with Large Complex Financial Institutions (LCFIs), and the likelihood of herding behavior in the industry can potentially undermine financial stability. Nonetheless, the data on hedge funds’ size and leverage suggest that these features are far from being systemically important. In contrast, the empirical evidence on the interconnectedness of hedge funds with LCFIs and their herding behavior is mixed. Based on these findings, the thesis focuses on one particular aspect of hedge fund regulation: direct vs. indirect regulation. In this respect, a major contribution of the thesis to the literature consists in the explicit discussion of the relationships between hedge funds and other market participants. Specifically, the thesis locates the domain of the indirect regulation in the inter-linkages between hedge funds and prime brokers. Accordingly, the thesis argues that the indirect regulation is likely to address the contribution of hedge funds to systemic risk without compromising their benefits to financial markets. The thesis further conducts a comparative study of the regulatory responses to the potential contribution of hedge funds to financial instability through studying the EU Directive on Alternative Investment Fund Managers (AIFMD) and the hedge fund-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Prioritization of Potential Mates' History of Sexual Fidelity During a Conjoint Ranking Task

This series of studies is the first to use conjoint analysis to examine how individuals make trade-offs during mate selection when provided information about a partner's history of sexual infidelity. Across three studies, participants ranked profiles of potential mates, with each profile varying across five attributes: financial stability, physical attractiveness, sexual fidelity, emotional investment, and similarity. They also rated each attribute separately for importance in an ideal mate. Overall, we found that for a long-term mate, participants prioritized a potential partner's history of sexual fidelity over other attributes when profiles were ranked conjointly. For a short-term mate, sexual fidelity, physical attractiveness, and financial stability were equally important, and each was more important than emotional investment and similarity. These patterns contrast with participants' self-reported importance ratings of each individual attribute. Our results are interpreted within the context of previous literature examining how making trade-offs affect mate selection.

The Role of Monetary Policy in Pursuing Economic Activity in Selected Transition Countries

The process of transition has brought an urgent need to develop many new market-oriented institutions or in some cases to reconstruct existing ones. One of the most important institutions of western-type economies is a central bank. It fulfils several "public good" functions, the most important of which are the achievement of stable price levels and assuring the financial stability of the economy. Nevertheless, even in economies with a long-standing market tradition, the question of whether a central bank is able to stimulate economic activity or whether all its cyclical actions lead only to changes in price levels remains open. The main purpose of this analysis was to empirically prove or disprove the relation between monetary policy and economic activity in more advanced transition countries. Basing his findings on commonly used econometric methods (causality tests, VAR modelling and simulations, simultaneous equations models), Delakorda concludes that the relation between money and economic activity is a mutual one, as there are significant differences between different countries in the conduct of monetary policy and in the environment of central banks. It is the latter which determines the relation between money and economic activity.

Potencial de la producción de bioelectricidad de las Comarcas Agrarias de la Comunidad de Madrid en base a centeno y triticale

En el presente trabajo se estudia la producción potencial de biomasa procedente de los cultivos de centeno y triticale en las seis comarcas agrarias de la Comunidad de Madrid (CM) y la posibilidad de su aplicación a la producción de bioelectricidad en cada una de ellas. En primer lugar se realiza un estudio bibliográfico de la situación actual de la bioelectricidad. Uno de los principales datos a tener en cuenta es que en el PER 2011- 2020 se estima que el total de potencia eléctrica instalada a partir de biomasa en España en el año 2020 sea de 1.350 MW, unas dos veces y media la existente a finales de 2010. Además, se comenta el estado de la incentivación del uso de biomasa de cultivos energéticos para producción de electricidad, la cual se regula actualmente según el Real Decreto-ley 9/2013, de 12 de Julio, por el que se adoptaron medidas urgentes para garantizar la estabilidad financiera del sistema eléctrico, y se consideran los criterios de sostenibilidad en el uso de biocombustibles sólidos. Se realiza una caracterización de las seis comarcas agrarias que forman la Comunidad Autónoma de Madrid: Área Metropolitana, Campiña, Guadarrama, Lozoya- Somosierra, Sur-Occidental y Vegas, la cual consta de dos partes: una descripción de la climatología y otra de la distribución de la superficie dedicada a barbecho y cultivos herbáceos. Se hace una recopilación bibliográfica de los modelos de simulación más representativos de crecimiento de los cultivos (CERES y Cereal YES), así como de ensayos realizados con los cultivos de centeno y triticale para la producción de biomasa y de estudios efectuados mediante herramientas GIS y técnicas de análisis multicriterio para la ubicación de centrales de bioelectricidad y el estudio de la logística de la biomasa. Se propone un modelo de simulación de la productividad de biomasa de centeno y de triticale para la CM, que resulta de la combinación de un modelo de producción de grano en base a datos climatológicos y a la relación biomasa/grano media de ambos cultivos obtenida en una experiencia previa. Los modelos obtenidos responden a las siguientes ecuaciones (siendo TN = temperatura media normalizada a 9,9 ºC y PN = precipitación acumulada normalizada a 496,7 mm): - Producción biomasa centeno (t m.s./ha) = 2,785 * [1,078 * ln(TN + 2*PN) + 2,3256] - Producción biomasa triticale (t m.s./ha) = 2,595 * [2,4495 * ln(TN + 2*PN) + 2,6103] Posteriormente, aplicando los modelos desarrollados, se cuantifica el potencial de producción de biomasa de centeno y triticale en las distintas comarcas agrarias de la CM en cada uno de los escenarios establecidos, que se consideran según el uso de la superficie de barbecho de secano disponible (25%, 50%, 75% y 100%). Las producciones potenciales de biomasa, que se podrían alcanzar en la CM utilizando el 100% de la superficie de barbecho de secano, en base a los cultivos de centeno y triticale, se estimaron en 169.710,72 - 149.811,59 - 140.217,54 - 101.583,01 - 26.961,88 y 1.886,40 t anuales para las comarcas de Campiña - Vegas, Sur - Occidental - Área Metropolitana - Lozoya-Somosierra y Guadarrama, respectivamente. Se realiza un análisis multicriterio basado en la programación de compromiso para definir las comarcas agrarias con mejores características para la ubicación de centrales de bioelectricidad en base a los criterios de potencial de biomasa, infraestructura eléctrica, red de carreteras, espacios protegidos y superficie de núcleos urbanos. Al efectuar el análisis multicriterio, se obtiene la siguiente ordenación jerárquica en base a los criterios establecidos: Campiña, Sur Occidental, Vegas, Área Metropolitana, Lozoya-Somosierra y Guadarrama. Mediante la utilización de técnicas GIS se estudia la localización más conveniente de una central de bioelectricidad de 2,2 MW en cada una de las comarcas agrarias y según el uso de la superficie de barbecho de secano disponible (25%, 50%, 75% y 100%), siempre que exista potencial suficiente. Para el caso de la biomasa de centeno y de triticale en base seca se considera un PCI de 3500 kcal/kg, por lo que se necesitarán como mínimo 17.298,28 toneladas para satisfacer las necesidades de cada una de las centrales de 2,2 MW. Se analiza el potencial máximo de bioelectricidad en cada una de las comarcas agrarias en base a los cultivos de centeno y triticale como productores de biomasa. Según se considere el 25% o el 100% del barbecho de secano para producción de biomasa, la potencia máxima de bioelectricidad que se podría instalar en cada una de las comarcas agrarias variaría entre 5,4 y 21,58 MW en la comarca Campiña, entre 4,76 y 19,05 MW en la comarca Vegas, entre 4,46 y 17,83 MW en la comarca Sur Occidental, entre 3,23 y 12,92 MW en la comarca Área Metropolitana, entre 0,86 y 3,43 MW en la comarca Lozoya Somosierra y entre 0,06 y 0,24 MW en la comarca Guadarrama. La potencia total que se podría instalar en la CM a partir de la biomasa de centeno y triticale podría variar entre 18,76 y 75,06 MW según que se utilice el 25% o el 100% de las tierras de barbecho de secano para su cultivo. ABSTRACT In this work is studied the potential biomass production from rye and triticale crops in the six Madrid Community (MC) agricultural regions and the possibility of its application to the bioelectricity production in each of them. First is performed a bibliographical study of the current situation of bioelectricity. One of the main elements to be considered is that in the PER 2011-2020 is estimated that the total installed electric power from biomass in Spain in 2020 was 1.350 MW, about two and a half times as at end 2010. Also is discussed the status of enhancing the use of biomass energy crops for electricity production, which is currently regulated according to the Real Decreto-ley 9/2013, of July 12, by which urgent measures were adopted to ensure financial stability of the electrical system, and there are considered the sustainability criteria in the use of solid biofuels. A characterization of the six Madrid Community agricultural regions is carried out: Area Metropolitana, Campiña, Guadarrama, Lozoya-Somosierra, Sur-Occidental and Vegas, which consists of two parts: a description of the climatology and another about the distribution of the area under fallow and arable crops. It makes a bibliographic compilation of the most representative crop growth simulation models (CERES and Cereal YES), as well as trials carried out with rye and triticale crops for biomass production and studies conducted by GIS tools and techniques multicriteria analysis for the location of bioelectricity centrals and the study of the logistics of biomass. Is proposed a biomass productivity simulation model for rye and triticale for MC that results from the combination of grain production model based on climatological data and the average relative biomass/grain of both crops obtained in a prior experience. The models obtained correspond to the following equations (where TN = normalized average temperature and PN = normalized accumulated precipitation): - Production rye biomass (t d.m./ha) = 2.785 * [1.078 * ln (TN + 2*PN) + 2.3256] - Production triticale biomass (t d.m./ha) = 2,595 * [2.4495 * ln (TN + 2*PN) + 2.6103] Subsequently, applying the developed models, the biomass potential of the MC agricultural regions is quantified in each of the scenarios established, which are considered as the use of dry fallow area available (25%, 50%, 75 % and 100%). The potential biomass production that can be achieved within the MC using 100% of the rainfed fallow area based on rye and triticale crops, were estimated at 169.710,72 - 149.811,59 - 140.217,54 - 101.583,01 - 26.961,88 and 1.886,40 t annual for the regions of Campiña, Vegas, Sur Occidental, Area Metropolitana, Lozoya- Somosierra and Guadarrama, respectively. A multicriteria analysis is performed, based on compromise programming to define the agricultural regions with better features for the location of bioelectricity centrals, on the basis of biomass potential, electrical infrastructure, road network, protected areas and urban area criteria. Upon multicriteria analysis, is obtained the following hierarchical order based on criteria: Campiña, Sur Occidental, Vegas, Area Metropolitana, Lozoya-Somosierra and Guadarrama. Likewise, through the use of GIS techniques, the most suitable location for a 2,2 MW bioelectricity plant is studied in each of the agricultural regions and according to the use of dry fallow area available (25%, 50% , 75% and 100%), if there is sufficient potential. In the case of biomass rye and triticale dry basis is considered a PCI of 3500 kcal/kg, so it will take at least 17,298.28 t to satisfy the needs of each plant. Is analyzed the maximum bioelectricity potential on each of the agricultural regions on the basis of the rye and triticale crops as biomass producers. As deemed 25% or 100% dry fallow for biomass, the maximum bioelectricity potential varies between 5,4 and 21,58 MW in the Campiña region, between 4,76 and 19,05 MW in the Vegas region, between 4,46 and 17,83 MW in the Sur Occidental region, between 3,23 and 12,92 MW in the Area Metropolitana region, between 0,86 and 3,43 MW in the Lozoya-Somosierra region and between 0,06 and 0,24 MW in the Guadarrama region. The total power that could be installed in the CM from rye and triticale biomass could vary between 18.76 and 75.06 MW if is used the 25% or 100% of fallow land for rainfed crop.

Don't blame the economists. It is an inverse problem!

The seriousness of the current crisis urgently demands new economic thinking that breaks the austerity vs. deficit spending circle in economic policy. The core tenet of the paper is that the most important problems that natural and social science are facing today are inverse problems, and that a new approach that goes beyond optimization is necessary. The approach presented here is radical in the sense that it identifies the roots in key assumptions in economic theory such as optimal behavior and stability to provide an inverse thinking perspective to economic modeling, of use in economic and financial stability policy. The inverse problem provides a truly multidisciplinary platform where related problems from different disciplines can be studied under a common approach with comparable results.

Banking crises and government intervention

Intervention has taken different forms in different countries and periods of time. Moreover, recent episodes showed that in front of an imminent crisis, the promise of no interventions made by governments is barely credible. In this paper we address the problem of resolving banking crises from the government perspective, taking into account the fact that preventing banking crises is crucial for the government. In addition, we introduce the moral hazard problem, inherent in the banking system, and consider the interaction between regulation, policy measures and banks’ behavior. To the best of our knowledge, this is the first paper that compares different policy plans to resolve banking crises in an environment where insufficiently capitalized banks have incentives to take risk, and the government has to decide whether to provide public services or impede crises. We show that when individuals highly value public services then the best policy in terms of welfare is to apply the tax on early withdrawals, as the government can transfer those taxes to the whole population by investing in public services (although at some cost). Conversely, when individuals assign a low value to consuming public services, recapitalization is the dominant policy. Finally, when the probability of a crisis is sufficiently high, capital requirements should be used

A Sound Investment for Employees and Their Employers: Retirement Planning, Reinvented

Offering competitive health and wellness benefit programs is ever challenging for companies, as industry leaders continually devise ways to innovate and deliver high-value programs to attract and retain employees. Financial stability is a form of wellness, and yet companies offer limited finance-related benefit offerings. Employees are commonly given access to retirement savings plans and college savings plans, and yet employers do not typically incorporate educational components into benefit programs. Research presented in this paper examines the financial issues impacting the lives of young workers in the United States and makes the case for a new recruitment and retention tool: a dynamic, practical benefit program designed to engage employees in their financial planning early and empower them to make informed decisions.

Should non-euro area countries join the single supervisory mechanism? Bruegel Policy Contribution 2013/06, 13 March 2013

Irrespective of the euro crisis, a European banking union makes sense, including for non-euro area countries, because of the extent of European Union financial integration. The Single Supervisory Mechanism (SSM) is the first element of the banking union. From the point of view of non-euro countries, the draft SSM regulation as amended by the EU Council includes strong safeguards relating to decision-making, accountability, attention to financial stability in small countries and the applicability of national macro-prudential measures. Non-euro countries will also have the right to leave the SSM and thereby exempt themselves from a supervisory decision. The SSM by itself cannot bring the full benefits of the banking union, but would foster financial integration, improve the supervision of cross-border banks, ensure greater consistency of supervisory practices, increase the quality of supervision,avoid competitive distortions and provide ample supervisory information. While the decision to join the SSM is made difficult by the uncertainty about other elements of the banking union, including the possible burden sharing, we conclude that non-euro EU members should stand ready to join the SSM and be prepared for the negotiations of the other elements of the banking union.