country risk portfolio decisions and regulation in international bank lending abstract this paper examines the concept of country risk and relates it to the construction of efficient loan portfolios in international banking applicability of conventional portfolio theoretic concepts to the management of country lending exposure is examined as are the requisites of country review systems for national exposure management the issue of international banking regulation is assessed in this context focusing on the dangers inherent in national and international regulatory initiatives for optimum global capital allocation

the future of natural gas consumption in beijing guangdong and shanghai an assessment utilizing markal natural gas could possibly become a si0gnificant portion of the future fuel mix in china however there is still great uncertainty surrounding the size of this potential market and therefore its impact on the global gas trade in order to identify some of the important factors that might drive natural gas consumption in key demand areas in china we focus on three regions beijing guangdong and shanghai using the economic optimization model markal we initially assume that the drivers are government mandates of emissions standards reform of the chinese financial structure the price and available supply of natural gas and the rate of penetration of advanced power generating and end use the results from the model show that the level of natural gas consumption is most sensitive to policy scenarios which strictly limit so2 emissions from power plants the model also revealed that the low cost of capital for power plants in china boosts the economic viability of capital intensive coal fired plants this suggests that reform within the financial sector could be a lever for encouraging increased natural gas use

the national and international impacts of coal to gas switching in the chinese power sector abstract we evaluate the national and international impacts on energy consumption and production trade and economic activity of chinese coal to gas switching in the electric power sector we find that assumptions about growth rates in electricity generation from renewables are the key determinant in evaluating the economic consequences for coal to gas switching in china the ability to supplement natural gas generation with renewables leads to smaller reductions in chinese and global economic activity than the alternatives

capital controls the case of argentina abstract in this paper the effects of capital controls on the observed nominal interest rate differential adjusted for exchange rate changes between argentina and the united states are examined a simple model of portfolio behavior is used which is based on dooley and isard s 1980 work the model separates the component of the observed nominal interest rate differential adjusted for exchange rate changes between the argentinian rate and the dollar rate which was due to political and exchange risk premia associated with prospective controls from the component of the differential due to the existing controls the empirical analysis shows that both the existing and prospective contrls combined explain about 83 per cent of the nominal interest rate differential

north american natural gas and energy markets in transition insights from global models this modeling comparison exercise looks at the global consequences of increased shale gas production in the u s and increased gas demand from asia we find that differences in models theoretical construct and assumptions can lead to divergences in their predictions about the consequences of u s shale gas boom in general models find that u s high shale gas scenario leads to increased u s production lower global gas prices and lower gas production in non u s regions gas demand in asia alone has little effects on u s production but together with the shale gas boom the u s can have a large export advantage overall models find u s exports level range from 0 06 to 13 7 trillion cubic feet tcf in 2040 the comparison of supply demand and price changes in response to shocks reveals important differences among models first is how the demand shocks were implemented and how the model responds to shocks static and elastic within each time period vs endogenous to the long term gross domestic product gdp growth second is how the supply response is expressed through fuel technology substitutions particularly the flexibility of cross fuel substitution in the power sector identifying these differences is important in understanding the model s insights and policy recommendations

the reform of electricity power sector in the pr of china deregulation was launched as a concept in the united states more than a decade ago the european union commission has also formally announced that electric deregulation must be completed by the end of 2005 deregulation or reform has already been a popular topic on the electricity power sector this paper will discuss the restructuring and regulatory reforms in the pr china s power sector it begins with a discussion of the characteristics of electricity reform or deregulation in other countries including the us the united kingdom and so on it will be followed by the industry structure and regulatory framework that characterized china s power industry during the latter part of the 20th century and the history of china s reform to restructure the power industry to competitive suppliers of generating services in recent years it discusses the role of the state power corporation in the reform and gives a detailed description of the latest electricity reform in the year 2002 the paper concludes with some thoughts regarding future challenges and trends on the reform for china s power sector

bond issues as a replacement for bank lending to ldcs a reconsideration of the lessons of the 19th century for the present day abstract following the debt crisis the record of commercial bank long term lending to ldcs has been severely questioned instability with overlending yielding to underlending is attributed to distortions arising from official measures intended to protect the payments mechanism substituting the 19th century practice of bond issues appears to offer market based regulation of stable long term financing obviating official involvement this paper questions the diagnosis of bank lending instability and argues that 19th century bond markets evidenced similar tendencies through the competitive behavior of merchant banks prudential regulation and limitation of deposit insurance rather than bank exclusion is the appropriate response

price dispersion with directed search we model a market where identical buyers direct their search to identical capacity constrained sellers sellers cannot fully commit to the list price so strategic bargaining may determine the sale price we study search and pricing behavior in symmetric equilibrium sale prices exhibit equilibrium dispersion as they respond naturally to local demand conditions uncoordinated search decisions lead to equilibrium demand heterogeneity so sellers realizing large demand bargain prices up we characterize the sale price distribution parametrically studying how different commitment limitations and market features affect pricing and surplus shares we also determine endogenously

the demand for coal among china s rural households estimates of price and income elasticities abstract china s residential sector has experienced rapid electrification and gasification among rural households however coal still accounts for a large share of energy use especially in the north use of coal for cooking and heating brings large health and pollution risks from a theoretical viewpoint economic tools such as taxes and subsidies have the potential to play a crucial role in addressing this issue in this paper a provincial level dataset is used to estimate the price and income elasticities of aggregate coal demand by rural households we find that coal is a non giffen inferior good for the rural household sector this means that future income growth may help to induce switching from coal demand is becoming more price elastic as rural incomes grow we also find that rural residential coal demand is more price and income responsive in the south than the north perhaps because of fewer substitution options in the north our results provide benchmarks and parameters for policy simulation research

matching search and bargaining abstract first the paper incorporates search for alternative opportunities into a model of strategic bargaining second this search and bargaining model is embedded in a market matching model the solutions are presented in a manner that clarifies the role of the search abilities and the details of the bargaining procedure in the determination of the outcomes the predictions of the model are contrasted with the related literature the main accomplishment is the attainment of a manageable model which is still rich enough to grasp important differences between environments which are not captured by the standard matching models

equilibrium in a market with sequential bargaining this paper considers a market where pairs of agents who are interested in carrying out a transaction are brought together by a stochastic process and upon meeting initiate a bargaining process over the terms of the transaction the basic bargaining problem is treated with the strategic approach the paper derives the steady state equilibrium agreements analyzes their dependence on market conditions such as the relative numbers of agents of different types and discusses their relations with the competitive equilibrium outcome and other results in the search equilibrium literature this paper considers a market that operates in the following way pairs of agents who have mutual interest in carrying out a transaction are brought together by a stochastic process when two agents meet they initiate a bargaining process over the terms of the transaction if two agents reach an agreement a transaction takes place and they leave the market of course the bargaining positions and hence the agreement reached in any particular meeting will be affected by the conditions prevailing in the market these will include the chances that each of the negotiating parties have of meeting other partners in the event that the agreement in the current negotiations is delayed also the expected length of time required to achieve an alternative transaction and the expected behavior of alternative partners the study of such a market mechanism is of interest for two reasons firstly it captures some realistic aspects of the trade in certain specific markets e g asset markets such as housing and some labor markets secondly it contributes to an understanding of the micro mechanisms of price formation and their role in shaping market outcomes in both cases the features studied are largely neglected in the traditional market equilibrium analyses the related literature includes the articles by diamond 4 5 diamond and maskin 6 mortensen 8 9 and zusman and bell 13 these articles consider markets of the type described above in which transactions are concluded at pairwise meetings of agents the major difference between our work and these articles is in the approach to the basic bargaining problem in the cited articles it is assumed that a meeting is concluded with an instantaneous agreement which divides the associated surplus in an arbitrary predetermined way when the surplus is assumed to be divided equally the division rule is in fact nash s axiomatic bargaining solution in contrast the present paper treats the basic bargaining problem with the strategic approach see rubinstein 19 which constitutes an attempt to look into the bargaining black box this approach explicitly models the time dimension of the bargaining process describes in detail the bargaining procedure and justifies the agreement as a perfect equilibrium in

interfuel substitution a meta analysis interfuel substitutability has been of longstanding interest to the energy economics and policy community however no quantitative meta analysis has yet been carried out of this literature this paper fills this gap by analyzing a broad sample of studies of interfuel substitution in the industrial sector manufacturing industry or subindustries or macro economy of a variety of developed and developing economies publication bias is controlled for by including the primary study sample size in the meta regression results for the shadow elasticities of substitution between coal oil gas and electricity for forty six primary studies show that at the level of the industrial sector there are easy substitution possibilities between all the fuel pairs with the exception of gas electricity and coal electricity substitution possibilities seem more constrained at the macro level and less constrained in sub industries estimates also vary across countries publication bias does not seem to be present but model and data specification issues very significantly affect the estimates derived by each individual study estimates from cross section regressions are generally largest fixed effects panel estimates intermediate in magnitude and time series estimates are mostly much smaller econometric research suggests that the fixed effects estimates are likely the best among the existing studies though biased downwards

the price and income elasticity of china s natural gas demand a multi sectoral perspective abstract natural gas as a clean low carbon energy will play an important role in the world s low carbon energy transformation in this paper research on the elasticity of natural gas demand is surveyed and it is found that the price and income elasticities of natural gas demand in different sectors are distinctive in particular this paper constructs an autoregressive distribution lag model to study the elasticity of natural gas demand in various sectors of china the results show that except for the residents sector the long run price elasticity of natural gas demand in other sectors is greater than 0 which is contrary to the estimates of developed countries the demand for natural gas is complementary to coal in industrial and power generation sectors which is also different from developed countries the elasticity of natural gas demand in residents sector is lack in price elasticity but abundant in income elasticity which is similar to the developed countries the results also shows that natural gas and oil are substitutes for each other in the transportation sector and natural gas and coal are substitutes for each other in service sector

an imbalanced development of coal and electricity industries in china china s coal and electricity industries have a strong reliance on each other however because of excessive invasion of government it is difficult for these two industries to form a stable reasonable and transaction cost saving relationships but long run disputes and quarrels this paper discusses the pricing policies and transaction relationship between these two industries from the historical perspective it begins with the discussion of coal coal market has become competitive since 1980 due to the system of dual track approach but coal sold to electricity was still tightly controlled by government guided pricing then the paper examines electricity investment and tariff reform unlike coal entry to electricity generation sector was gradually relaxed but generation and retailing tariffs are still strictly regulated as energy demand and prices soared after 2002 coal and electricity enterprises are all unsatisfied with the rule of price setting of coal sold to electricity industry this paper concludes that the deliberate low coal price policy does protect electricity industry from fuel cost fluctuation but harm coal industry allocative and productive efficiency are difficult to achieve in the long run

equilibrium price distributions equilibrium price distributions for a homogeneous product consistent with individual incentives are investigated they arise in informationally imperfect markets in which the only primitive datum is the distribution of search costs it is shown that single multi and continuous price distributions are all viable long run phenomena depending on the nature of search costs a method for computing equilibrium price distributions is also provided jevons law of one price has long been an accepted dictum in economic theory in a classroom presentation it still serves sometimes implicitly as a major premise in many micro models of market interaction much of the descriptive theory as well as welfare analysis hinges on this assumption yet one s day to day experience reveals that price differentials are a viable phenomenon and that looking for lower prices may very well be a rewarding activity the prospects of eventually hitting a bargain and the resulting price reduction would more than compensate for the cost incurred during the search process moreover the existence of price dispersions appear to be an empirically stable phenomenon snapshots of markets for relatively homogeneous products reveal substantial and recurring price differentials stigler 1961 and pratt wise and zeckhauser 1979 for example report some evidence supporting this claim an important article by stigler 1961 focused economists attention on the crucial role played by the informational structure of markets it gave rise to the study of the

variable rate debt instruments and corporate debt policy sustained high rate of inflation has led to the creation of debt instruments with variable interest rate the availability of these debt instruments presents management with the problem of the choice of the optimal debt portfolio this paper deals with this problem assuming a given and optimal debt to equity ratio given expected monetary value maximization an efficient frontier is derived in terms of the expected net income and probability of bankruptcy where net income is defined as operating income minus debt repayment this efficient frontier is shown to be also mean variance efficient it is also shown that in most cases the optimal debt portfolio includes more than one debt instrument in other words the firm will avoid the policy of minimizing the expected cost of its debt repayments or the policy of minimizing the costs of bankruptcy the optimal solution itself is affected by market variables like the relative expected cost of different debt instruments and by firm specific variables like the variability of its operating income stream and the covariance between the operating income and the debt repayments

validating energy oriented cge models although cge models have received heavy usage they are often criticized as being insufficiently validated key parameters are often not econometrically estimated and the performance of the model as a whole is rarely checked against historical outcomes as a consequence questions frequently arise as to how much faith one can put in cge results in this paper we employ a novel approach to the validation of a widely utilized global cge model gtap e by comparing the variance of model generated petroleum price distributions driven by historical demand and supply shocks to the model with observed five year moving average price distributions we conclude that energy demand in gtap e is far too price elastic over this time frame after incorporating the latest econometric estimates of energy demand and supply elasticities we revisit the validation question and find the model to perform more satisfactorily as a further check we compare a deterministic global general equilibrium simulation based on historical realizations over the 2001 2006 period during which petroleum prices rose sharply along with growing global energy demands as anticipated by the stochastic simulations the revised model parameters perform much better than the original gtap e parameters in this global general equilibrium context

electricity regulation and electricity market reforms in china the electricity industry of china has been in a process of reforms since the 1980s this paper gives a review on the three main stages of reforms in china so as to trace out key features of various reform measures including those for power investment financing the separation between government and power enterprises and the division between power generation firms and power grids the findings suggest that further regulatory change in china s electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market oriented structure prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper

the indirect approach to trade liberalization dynamic consideration on liberalization cum stabilization policies in latin america abstract recent experience of some latin american countries has shown that a switch to an outward oriented development strategy involves difficult adjustment problems these problems may overburden the economy s adjustment capacity when the heritage of an extended period of import substitution has to be overcome together with severe macroeconomic imbalances when these conditions apply priority should be given to the elimination of the anti export bias even at the expense of new temporary export subsidies and of the macroeconomic disturbances before trade liberalization in the proper meaning of the word would have to be realized

gaining more by stocking less a competitive analysis of product availability the price competition between two firms can affect their decisions about product availability with occasional stockouts a firm loses from foregone sales yet it may indirectly benefit from the higher price a competitor is able to charge the more prone customers are to search elsewhere for the product upon encountering a stockout the greater is the gain from the reduced price competition between firms this paper establishes conditions whereby the strategic interaction of reduced price competition between firms outweighs the loss from foregone sales in such cases a firm can increase its expected profits by choosing to stock less these results provide a competitive rationale for the high stockout levels observed in some retail situations and have implications for the analysis of product availability in public policy settings

price setting and competition in a simple duopoly model the paper studies a market in which there are two sellers and one buyer each agent wants to trade at most one unit of an indivisible commodity the sellers are uncertain whether the buyer is receiving offers from one or both of them at any given time this model induces competitive and monopolistic outcomes for particular parameter values but other things being equal as the buyer becomes very patient the equilibrium price converges to the competitive one

renewable energy policy and electricity market reforms in china the article examines the potential effectiveness of the renewable energy policy in china and its regulatory law framework it frames the option of renewable energy technology within the background of the long lasting electricity problems that china has faced including serious supply shortages reliance on coal and severe environmental contamination its dual administrative and ownership system based on state and privately owned industry is discussed together with the market reform measures adopted in the sector current renewable energy policy is analysed and the scope of the 2005 renewable energy promotion law is investigated this is conducted within the context of the electricity sector reform that china adopted and its effects upon the prospects of encouraging as well as expanding the development of renewable energy this study draws upon primary information collected from interviews with stakeholders on the policy adequacy and identifies three main types of shortcomings that have interfered with a more successful expansion of renewable energy in china

endogenous availability in search equilibrium bargaining power by shopping at two firms and then bringing those firms into competition with one another knowing this firms adjust quoted prices to keep customers from exercising this option we compare equilibrium prices and availability firm profits and customer welfare under duopoly with those that would obtain under monopoly wefind that for low levels of exogenous customer search costs duopolists provide lower prices and lower availability while for high customer search costs duopolists provide the same price but greater availability than would a monopolist

trade and capital account liberalization in a keynesian economy this paper analyzes the process of trade and capital account liberalization in a keynesian framework with unemployed resources previous studies on this subject have ignored the potential interactions between the liberalization process and the pre existing distortions in the economy this paper derives the optimal liberalization policy given the keynesian context and solves for explicit formulas for the import tariffs and the capital account tax in a two period general equilibrium model it is argued that a trade reform is likely to have recessionary effects in the short run if the capital account has already been liberalized

risk in international banking this paper differentiates between country risk the probability that a country will default on its obiigations and two forms of international banking risk 1 the extent to which a bank s foreign activities affect the cost of equity capital and 2 the extent to which a bank s foreign activities affect the probability of bankruptcy the paper focuses on the latter form of international banking risk using chebyshev s inequality it is pointed out that the risk of bankruptcy is influenced by the mean as well as the variance of the return distribution consequently restrictions on the international composition of a bank s portfolio may increase rather than reduce the probability of bankruptcy

search bargaining and signalling in the market for legal services over the last eight centuries lawyers in common law countries have generally been precluded from buying their clients cases recently a number of economists and lawyers have argued that sale should be allowed so as to eliminate moral hazard particularly when contingent fees are used this argument is based on full information reasoning however if the lawyer has private information about the case value then compensation demands potentially signal this value when the client can search over lawyers we provide a formal model and a family of computational examples that show that allowing possibly partial purchase can reduce expected social efficiency

bargaining search costs and equilibrium price distributions this paper studies a bargaining model of equilibrium price distributions consumers choose a seller at random and face search costs to switching to another store in the market equilibrium the prices at all stores are determined simultaneously as the perfect equilibrium of a bargaining game in this game the buyer has the outside option to search for another seller differences between the sellers types create price dispersions typically the number of active sellers increases with higher search costs the market equilibrium converges to the competitive equilibrium under perfect information when search costs become small