environmental regulation and u s economic growth in this article we quantify the costs of pollution controls by reporting the results of simulations of the growth of the u s economy with and without regulation for this purpose we have constructed a detailed model of the economy that includes the determinants of long term growth we have also analyzed the interaction between industries in order to capture the full repercussions of environmental regulations however we have not attempted to assess the benefits resulting from a cleaner environment we find that pollution abatement has emerged as a major claimant on the resources of the u s economy the cost of emission controls is more than 10 of the total cost of government purchases of goods and services

china s macroeconomic imbalances causes and consequences in recent years china has experienced two forms of extreme macroeconomic imbalance an expenditure imbalance in the sense of very high investment and very low consumption giving rise to rapid capital accumulation and an imbalance between expenditure and production producing external imbalance i e a huge surplus on the current account of the balance of payments both imbalances imply a low rate of time discount by both government and society consumption in the present is forgone in favour of consumption in the future the paper examines how these imbalances came about and goes on to consider whether they can be sustained and how they might be redressed there is no evidence that the rapid capital accumulation has reduced the rate of profit on capital and thus the incentive to invest however persistent external imbalance poses a threat to investment if it generates excess liquidity and asset bubbles the current account surplus rose remarkably in the years 2004 07 this was associated with exogenous increases in competiveness and in saving both attributable to the economic reform policies on current policies the surplus is likely to rise again once the world economy recovers from its recession this poses three sorts of problems each of which is examined in turn difficulties for macroeconomic stabilisation policies risk of capital loss on the foreign exchange holdings and the threat of retaliation by china s trading partners a combination of internal and external policies will be required to redress the imbalance

financial intermediation reserve requirements and inside money a general equilibrium analysis abstract reserve requirements are examined in a general equilibrium context the paper develops a simple general equilibrium model that includes diverse opportunities for investment and a role for financial intermediaries two versions of the model are considered one is a thought experiment in which currency serves purely to satisfy legal reserve requirements the other is more realistic the model is used to analyze the comparative static effects of changes in reserve requirements the effects of changes in other parameters of the economy in the presence of reserve requirements and some qualitative issues raised by reserve requirements

reserve requirements bank share prices and the uniqueeness of bank loans abstract this study examines the impact of changes in reserve requirements on large banks stock returns it finds statistically and economically significant abnormal returns on the day following the announcement of such changes this finding is consistent with the notion that reserve requirements are a tax on deposits it indicates however that bank s shareholders bear at least part of the tax thus it does not support the hypothesis advanced by some authors that the tax falls exclusively on banks borrowers the evidence further suggests that part of the tax falls on demand depositors these findings undercut the case for the uniqueness of bank loans insofar as it is based on the incidence of the deposit tax

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

the joint production of confidence endogenous regulation and nineteenth century commercial bank clearinghouses during the nineteenth century deposits increased relative to bank notes c ausing increased information asymmetry problems in banking this pape r describes how bank clearinghouses lowered these costs by monitoring bank activities and establishing mechanisms of managerial control i n effect regulating bank behavior such actions enforced the loca l one to one exchange rate between deposits and specie clearinghouse s increased regulation during financial panics creating and enforcin g a risk sharing device loan certificates for addressing panic rela ted information problems this paper concludes that the market s capacity to control bank managers depends on the banking product mix and more generally on information costs copyright 1987 by ohio state university press

the effect of clean water regulation on profitability testing the porter hypothesis previous theoretical research provides opposing arguments regarding the effect of environmental regulation on profitability this study provides empirical evidence on this debated effect by testing the strong version of the porter hypothesis we employ panel data analysis to examine the effect of water regulation as measured by permitted wastewater discharge limits on the profitability of publicly held firms operating within the chemical manufacturing industries we find that tighter water regulation meaningfully lowers profitability by reinterpreting profitability in terms of sales and costs the results demonstrate that tighter water regulation increases costs conditioned on a given level of sales

what s different among banks abstract based on commercial paper being a nearly perfect substitute for certificates of deposits cds and cd reserve requirements creating a higher cost of funds for banks fama shows that the banking industry must have some monopoly power relative to other financial institutions his analysis does not resolve whether this monopoly power is vested in banks collectively vis a vis other financial institutions or if the monopoly power extends to the level of individual banks using an event study framework to examine the elimination of a reserve requirement we find significant evidence of monopoly power at the level of individual banks

a meta analytical evaluation of sustainable city initiatives the role of the city in environmental management is increasingly coming to the fore a central element in creating urban environmental sustainability is the adoption of appropriate energy policies since most environmental externalities in cities are directly or indirectly related to energy use the current practice demonstrates an overwhelming variety of initiatives and policies so that the actual success of such strategies in a cross sectional comparative perspective is hard to evaluate in this context this paper offers an application of meta analysis as this approach is an interesting analytical contribution towards a better understanding of the critical success factors of urban energy policies the paper starts with a general overview of the issue of urban sustainability and sets out the importance of energy policies at the urban level it continues by offering a methodological framework for the assessment of critical factors related to the performance of sustainable energy strategies using a dat

the market valuation effects of reserve regulation abstract we demonstrate that the financial market s reaction to changes in reserve regulation implies that reserve requirements are an excise tax on banking activities changes in reserve requirements do not influence yields on treasury securities or returns on broad based portfolios of nonfinancial stocks and thus do not impound new information about monetary policy moreover changes in reserve requirements have an impact on nonbank financial firms that is opposite in sign to that of banks this suggests that reserve requirements shift the locus of some financial activities from the banking sector to the nonbank sector of the financial system

market based systems for reducing chemical use in agriculture in the united states this study uses a computable general equilibrium cge model of the u s economy to estimate the economic effects of agricultural fertilizer and pesticide input reductions on individual farm sectors and on the economy as a whole the costs of reducing agricultural chemicals using a market based approach and a command and control approach are compared the real cost to society of restrictng fertilizer and pesticide use by 20 percent across all uses is estimated to be 2 3 billion a market based approach that would provide incentives to reduce chemical use in the most cost efficient manner would be about 10 percent less costly

bank foreign lending mandatory disclosure rules and the reaction of bank stock prices to the mexican debt crisis this paper examines the effects of the mexican debt mora torium in august 1982 on bank valuation the mexican default resulted in the passage of regulations requiring public disclosure of bank fo reign lending exposure the authors find that even in the absence of public disclosure regulations investors were able to discriminate a mong banks with different levels of exposure copyright 1987 by the university of chicago

environmental regulations and productivity growth the case of fossil fueled electric power generation this paper measures and analyzes the effect of sulfur dioxide emission restrictions on the rate of productivity growth in the electric power industry over the 1973 79 business cycle a firm specific measure of regulatory intensity is developed which depends on the severity of the emission standard the extent of enforcement and the unconstrained emission rate relevant to each utility the results indicate that emission regulations result in significantly higher generating costs primarily from the increased use of low sulfur fuels the average rate of productivity growth was reduced by 0 59 percentage points per year for constrained utilities

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

information reliability and a theory of financial intermediation this paper is an analysis of when it will be beneficial for agents engaged in the production of information to form coalitions the model is cast in a financial market framework thus leading to an identification of conditions sufficient for the existence of financial intermediaries intermediation is shown to improve welfare if informational asymmetries are present and the information generated to rectify these asymmetries is potentially unreliable the usual appeal to transactions costs to explain intermediation is not needed

sectoral and macroeconomic impacts of the large combustion plants in poland a general equilibrium analysis abstract this paper analyses the final incidence of direct costs of implementation of the eu directive on so 2 and no x emission limits for large combustion plants in poland first we simulate a model from a power sector perspective where compliance with the directive appears to be associated only with direct costs second a more realistic market wide perspective is modeled where abatement costs borne by the power sector become the revenues of the sectors supplying abatement technologies and services simulations indicate that if environmental benefits of implementation are unaccounted for the directive would seem to cause a deadweight loss in the economy the overall impact however is likely to be less negative than what the interest groups claim

the role of policy in energy transitions lessons from the energy liberalisation era the aim of this paper is to discuss the period of energy privatisation and liberalisation which began in the 1980s within its wider historical context the key issues are what has been learned from this recent period and how significant is it in the light of an energy transition to low carbon energy system by 2050 energy liberalisation has led to positive and globally widespread but modest efficiency gains but a lack of clearly visible direct benefits to households in many countries it has significantly improved the governance of monopoly utilities via independent regulators the prospects for competition and innovation and the quality of policy instruments for environmental emissions control through the emergence of trading mechanisms we conclude that it is not liberalisation per se that will determine the movement towards a low carbon energy transition but the willingness of societies to bear the cost which will be significant no matter what the extent of liberalisation

can sustainability enhance business district attractiveness a survey of corporate property decisions in france this paper analyses the rising importance of sustainable principles in property decisions and its impact on attractiveness for business districts in france a behavioural survey of a large sample of corporate property managers and a multiple correspondence analysis highlight key factors indicating the influence of sustainable principles alongside more traditional determinants of territorial attractiveness this approach enables the drawing up of a typology of companies according to the influence of sustainability issues showing the rise in importance placed on sustainability in location decisions made by listed companies companies that own their head offices and companies located in the main business districts of the paris metropolitan area

bank suspension of convertibility abstract a banking panic occurs when depositors at all banks seek a large reduction in their deposit holdings suspension of convertibility of demand deposits into currency was the banking system s response to a banking panic when depositors are incompletely informed about the state of bank investments a panic can occur when depositors expect capital losses conditional on having observed noisy indicators of the state of bank investments banks with superior information about the investments can signal to depositors by suspending convertibility that continuation of the long term investments is mutually beneficial

the substantial bias from ignoring general equilibrium effects in estimating excess burden and a practical solution we show that under typical conditions the simple excess burden triangle formula substantially underestimates the excess burden of commodity taxes in some cases by a factor of 10 or more this formula performs poorly because it ignores general equilibrium interactions most important interactions between the taxed commodity and the labor market many prior studies have shown that general equilibrium interactions affect excess burden but have not appreciated the bias associated with ignoring these interactions or the quantitative importance of this bias we derive an implementable alternative to the simple formula this alternative formula captures interactions that the simple formula omits as a result it is both unbiased and usually more accurate

asset returns discount rate changes and market efficiency the primary purpose of this paper is to reconcile the previous findings of discount rate endogeneity with the presence of discount rate announcement effects in securities markets the crux of this reconciliation is the distinction between technical discount rate changes that are endogenous and nontechnical changes which contain some informative policy implications in essence we attempt to separate expected discount rate changes from unexpected changes or equivalently the expected component of discount rate changes from the unexpected component if markets are efficient the former should have no announcement effects while the latter may be associated with an announcement effect accordingly the focus of the empirical analysis is on the interaction between discount rate exogeneity the specific monetary policy regime and accouncement effects in addition we examine whether the behavior of these markets in the postannouncement period is consistent with the rapid price adjustment implied by market efficiency

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

the control of co2 emissions and its economic impact an age model for a german state since it is believed that co2 is responsible for 55 of the greenhouse effect a co2 levy is now under consideration in several countries for an assessment of the macroeconomic implications of an integrated energy and environmental policy we employ an applied general equilibrium model age since all sectors of an economy and all private households contribute to co2 emission our model is a temporary equilibrium model with capacity extension under adjustment costs and with abatement activities for so2 and nox emissions

sustainable energy projects and the community mapping single building use of microgeneration technologies in london microgeneration technologies offer the potential for distributed energy supply and consumption resulting in reduced reliance on centralised generation adoption of microgeneration for use in community settings is usually understood as having a beneficial contribution to sustainable development this is particularly relevant in urban environments which present specific challenges relating to the heterogeneity of building and land use small scale installations in buildings also appear to offer technological flexibility at the human level necessary for local participation in shaping the direction of sustainable development this paper reports on a project concerned with identifying on site energy generation projects in greater london a database was compiled comprising renewable and energy efficient microgeneration installations in multi occupancy buildings the relationships between each project and its associated organisations are mapped as a social network which illustrates the heterogeneity of technologies and actors involved as well as the flows of funding and expertise the structure of the resulting networks indicates a lack of participation by social or not for profit groups who are traditionally identified as community level actors the findings indicate that large institutional actors on the supply side may become regarded as renewable energy experts hence there is a need to consider how the concept of community level actors in urban microgeneration projects is applicable to local government and commercial organisations

transpacific trade imbalances causes and cures this paper explores the causes of the transpacific trade imbalances using an empirical global model it also evaluates the impact of various policies to reduce these imbalances we find the fundamental cause of trade imbalance since 1997 is changes in saving investment gaps attributed to the surge of the us fiscal deficits and the decline of east asia s private investment after the 1997 financial crisis our simulation results show that a revaluation of east asia s exchange rates by 10 per cent effectively a shift in monetary policy cannot resolve the imbalances we find east asia s concerted efforts to stimulate aggregate demand can have significant impacts on trade balances globally but the impact on the us trade balance is not large us fiscal contraction is estimated to have large impacts on the us trade position overall and on the bilateral trade balances with east asian economies these results suggest that in order to improve the transpacific imbalance macroeconomic adjustment will need to be made on both sides of the pacific

are reserve requirements relevant for economic stabilization abstract the level of the required reserve ratio and the payment of interest on required reserves are irrelevant for economic stability 1 when the central bank appropriately adjusts its interest elasticity of supply of reserves or currency to offset changes in the required reserve ratio or in the interest rate paid on required reserves or 2 when economic agents form their price level expectations rationally conditional on the current interest rate

london and beyond taking a closer look at urban energy policy this paper considers the field of urban energy policy a neglected yet important topic cities account for approximately two thirds of global primary energy consumption creating significant benefits and costs as a result there has been growing interest in the contribution of cities to global energy policy issues such as climate change but a number of significant questions remain e g how do energy policy processes differ between national and urban scales and how can cities contribute most effectively to global policy goals we present the results of interviews with key stakeholders in london to illustrate some unique features of the urban energy policy cycle we then take a wider view proposing a research agenda with three key goals describing the global variety of urban energy consumption and policy understanding the resulting diversity in responsibility vulnerability and capacity and developing shared procedures and solutions tackling these questions is vital if cities are to contribute fully to current energy policy efforts

estimating the costs of environmental protection in brazil abstract in this paper an effort is made to estimate the amounts of money the government of the state of sao paulo brazil must transfer to counties in which environmentally protected areas of any sort have been established by the state a methodology to estimate these transfers is proposed based on the potential loss of production in the protected areas and the corresponding amounts are calculated the results indicate that protecting 7 68 of the state s territory will cause a maximum decrease in its gdp of 0 05 the estimation of monetary values for environmental costs is of interest because it provides a basis for judgement among different environmental protection alternatives and between these and other investment projects

global fiscal adjustment and trade rebalancing the emergence of substantial fiscal deficits and a large build up of government debt in major advanced economies will inevitably lead to a period of fiscal consolidation in coming years in an earlier paper mckibbin and stoeckel 2010 explored the effects of this fiscal adjustment in advanced economies on the global economic outlook this paper focuses on the differences between the impacts of fiscal policy in advanced versus emerging economies in particular the need for more fiscal spending on infrastructure in emerging economies and the need for fiscal consolidation in advanced economies leads naturally to the question of what this asymmetric fiscal adjustment might do to global trade balances as well as global economic growth over the coming decades the adjustment needed in both regions is substantial and the asymmetry of the adjustment implies important consequences for trade and capital flows between regions as well as asset price adjustments within and between regions

reason for reserve reserve requirements and credit this paper considers the impact of a regulatory policy action on bank credit and traces its incidence across banks i make use of a reserve requirement increase in lebanon that was considerably greater on foreign currency deposits than on domestic currency deposits all banks cut lending as they scrambled to adjust portfolios but the policy shock disproportionately affected banks with a greater reliance on dollar funding and with low buffers of dollar liquid assets exposed domestic owned banks also adjusted more slowly than similar foreign owned banks that obtained outside funding descriptive firm bank matching evidence reveals a disproportionate impact on small firms

measuring the environmental consequences of trade policy a nonmarket cge analysis the newly approved gatt trade agreement is likely to focus greater attention on the conflicts between the proliferation of diverse national policies toward environmental quality and the need to maintain competitiveness in world markets virtually all policy evaluations of this conflict have been limited by a significant misspecification in existing models none of the available computable general equilibrium cge models for international trading patterns consistently reflect the effects of environmental resources on consumers preferences the purpose of this paper is to report the first generation of a composite nonmarket and cge model nm cge for the european community the united states japan and a single region for the rest of the world the model incorporates the morbidity and mortality effects of particulates sulfur oxides and nitrogen oxides it uses existing nonmarket valuation estimates freeman with a specification for consumer preferences that allows changes in atmospheric emissions to diffuse in different amounts to

combating the global financial crisis with aggressive expansionary monetary policy same medicine different outcomes in china the uk and usa in 2008 09 the usa and the uk undertook quantitative easing to drive interest rates to near zero to combat the global financial crisis and china increased the growth rate of base money slightly the resulting credit growth was very slight in the usa and uk but very large in china the us and uk money multipliers collapsed because the required capital adequacy ratio car was binding for many of their banks specifically the value of the money multiplier is zero when car is not met is one when car is binding and when the asset purchased by the central bank requires the commercial bank to hold capital against it and equals the reciprocal of the required reserve ratio when car is not binding to improve china s economic performance we propose three new growth drivers to replace the present instruments of macro stimulus changes in rural economic institutions to create new entrepreneurs an urbanisation strategy based on the principle of future home ownership and modernisation of the financial system

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

when green isn t mean economic theory and the heuristics of the impact of environmental regulations on competitiveness and opportunity cost abstract the conventional neoclassical economic wisdom argues that the opportunity costs of environmental regulations are high with negative implications for costs and profits and by implication for growth and per capita gross domestic product gdp the minority view that environmental controls induce cost offsets that minimise such opportunity costs is marginalised by the conventional wisdom which assumes that economic agents are x efficient in production a behavioral model of the firm is presented in this paper whereby x inefficiency in production prevails even in a world of perfect product market competition that is dominated by rational economic agents in this model environmental regulations affect both the level of x efficiency and the extent of technological change and greener firms can be cost competitive and profitable however private economic agents cannot be expected to adopt green economic policy independent of regulations since in this model there need not be any economic advantage accruing to the affected firms in becoming greener

estimates of the costs of kyoto marrakesh versus the mckibbin wilcoxen blueprint in this paper we update our earlier estimates of the cost of the kyoto protocol using the g cubed model taking into account the new sink allowances from recent negotiations as well as allowing for multiple gases and new land clearing estimates we then compare the protocol to an alternative policy outlined in mckibbin et al brookings policy brief no 17 june the brookings institution washington 1997 climate change policy after kyoto a blueprint for a realistic approach the brookings institution washington 2002a j econom perspect 16 2 2002b 107 that does not impose rigid emissions targets we focus particular attention on the sensitivity of compliance costs under each policy to unexpected changes in future economic conditions to illustrate the issue we evaluate the policies under two plausible alternative assumptions about a single aspect of the future world economy the rate of productivity growth in russia we find that moderate growth in russia would raise the cost of the kyoto protocol by as much as 50 percent but would have little effect on the cost of the alternative policy we conclude that the kyoto protocol is inherently unstable because unexpected future events could raise compliance costs substantially and place enormous pressure on governments to abrogate the agreement the alternative policy would be far more stable because it does not subject future governments to adverse shocks in compliance costs

banning the bulb institutional evolution and the phased ban of incandescent lighting in germany much academic attention has been directed at analysing energy efficiency investments through the lens of behavioural failure these studies have challenged the neoclassical framing of regulation which emphasises the efficiency benefits of price based policy underpinned by the notion of rational individual self mastery the increasing use of a regulatory ban on electric lamps in many countries is one of the most recent and high profile flash points in this dialectic of freedom versus the state in the public policy discourse this paper interrogates this debate through a study of electric lamp diffusion in germany it is argued that neoclassical theory and equilibrium analysis is inadequate as a tool for policy analysis as it takes the formation of market institutions such as existing regulations for granted further still it may be prone to encourage idealistic debates around such grand narratives which may in practice simply serve those who benefit most from the status quo instead we argue for an evolutionary approach which we suggest offers a more pragmatic framing tool which focuses on the formation of market institutions in light of shifting social norms and political goals in our case progress towards energy efficiency and environmental goals

modelling reality the need for both inter temporal optimization and stickiness in models for policy making there is a thriving debate on the usefulness of economic models for policy analysis which this paper explores it argues that there is a need for models that incorporate both the modern intertemporal approach to macroeconomics and short run ad hoc behaviour this need cannot be met by the simple models that permeate the macroeconomics literature but requires large scale simulation models such as the msg2 and g cubed multi country models in particular it is shown that the approach of these models gives insights into the adjustment into a number of historical episodes that are not well explained by simple macroeconomic frameworks reaganomics in the 1980s german reunification in the early 1990s fiscal consolidation in europe in the 1990s the formation of nafta the asian crisis and the current productivity boom in the usa the paper also argues that using a well defined theoretical specification but introducing real world rigidities can also go some way towards explaining the so called six major puzzles in international macroeconomics highlighted in a recent paper by obstfeld and rogoff 2000 copyright 2000 by oxford university press

financial intermediation and price level control abstract because currency and deposits are not perfect substitutes in all transactions there are simplified financial systems in which control of the supply of currency is sufficient to control the price level most important in a currency supply approach price level control does not imply control of financial intermediation thus price level goals never have to be weighed against the availability of credit to finance real activity

international growth spillovers geography and infrastructure there is significant academic evidence that growth in one country has a positive impact on growth in neighbouring countries this paper contributes to this literature by analysing the heterogeneous strength of growth spillovers across world regions and by investigating the contribution of transport and communication infrastructure to explain this heterogeneity and promote neighbourhood effects by defining neighbourhood on the basis of membership of regional trade agreements we focus on spillovers that work through regional integration and trade the analysis finds significant evidence for heterogeneity in growth spillovers which are strong between oecd countries and essentially absent in sub saharan africa ssa we further find strong interaction between infrastructure and being a landlocked country this suggests that growth spillovers from regional success stories in ssa and other lagging world regions will depend on first strengthening the channels through which such spillovers can spread most importantly connective infrastructure such as transport and telecommunication links

new keynesian versus old keynesian government spending multipliers renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy because of modelling uncertainty it is essential that policy evaluations be robust to alternative assumptions we find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust government spending multipliers in an alternative empirically estimated and widely cited new keynesian model are much smaller than in these old keynesian models the estimated stimulus is extremely small with gdp and employment effects only one sixth as large and with private sector employment impacts likely to be even smaller we investigate the sensitivity of our findings with regard to the response of monetary policy the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule of thumb behaviour in the new keynesian model in addition we relate our findings using estimated structural macroeconomic models to the recent literature using reduced form regression techniques