the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

impact of the carbon price on the integrating european electricity market we study the impact of the carbon price on the integrating electricity market in the eu our theoretical framework suggests that the price of carbon has a positive but uneven impact on electricity prices depending on the marginal production plant the carbon price may increase price differences in the short run we apply time series analysis on daily forward data from 2003 to 2011 and investigate whether we can find empirical evidence for our analytical findings our results support the hypotheses that integration in electricity prices has increased over time and that the carbon price has a positive but uneven impact on the integration of prices

time varying convergence in european electricity spot markets and their association with carbon and fuel prices abstract long run dynamics of electricity prices are expected to reflect fuel price developments since fuels generally account for a large share in the cost of generation as an integrated european market for electricity develops wholesale electricity prices should be converging as a result of market coupling and increased interconnectivity electricity mixes are also changing spurred by a drive to significantly increase the share of renewables consequently the electricity wholesale price dynamics are evolving and the fuel electricity price nexus that has been described in the literature is likely to reflect this evolution this study investigates associations between spot prices from the british french and nordpool markets with those in connected electricity markets and fuel input prices from december 2005 to october 2013 in order to assess the time varying dynamics of electricity spot price series localized autocorrelation functions are used electricity spot prices in the three markets are found to have stationary and non stationary periods when a trend in spot prices is observed it is likely to reflect the trend in fuel prices cointegration analysis is then used to assess co movement between electricity spot prices and fuel inputs to generation the results show that british electricity spot prices are associated with fuel prices and not with price developments in connected markets while the opposite is observed in the french and nordpool day ahead markets

rotating and accumulating savings and credit associations a development perspective abstract financial self help groups in low income countries consist of two basic types rotating and accumulating savings and credit associations or roscas and ascras in the ascra funds are not immediately withdrawn but are left to grow for loan making comparing the two groups the author finds similarities and differences efforts to rectify the rosca s shortcomings have prompted many innovations and given birth to a hybrid preserving the best of both types in constant adaptation to changing environments

losses from effluent taxes and quotas under uncertainty recent theoretical papers by adar and griffin j environ econ manag 3 178 188 1976 fishelson j environ econ manag 3 189 197 1976 and weitzman rev econ studies41 477 491 1974 show that different expected social losses arise from using effluent taxes and quotas as alternative control instruments when marginal control costs are uncertain key assumptions in these analyses are linear marginal cost and benefit functions and an additive error for the marginal cost function to reflect uncertainty in this paper empirically derived nonlinear functions and more realistic multiplicative error terms are used to estimate expected control and damage costs and to identify empirically the mix of control instruments that minimizes expected losses

government intervention in the mortgage market a study of anti redlining regulations abstract this paper addresses the question of whether economic incentives exist for mortgage lenders to avoid or to minimize mortgage originations in neighborhoods inhabited primarily by low income racial minorities the option pricing model is utilized to determine what mortgage borrower characteristics affect the market value of the mortgage contracts it is found that existing laws do not enable mortgage lenders to vary either origination prices or mortgage terms so as to adjust for differences in the market values of mortgages as a result incentives are created for both the mortgage lender and the mortgage insurer to avoid originations and underwritings in areas with relatively high default probabilities various changes in mortgage lending regulations are suggested to eliminate these incentives and the effects of alternative programs to subsidize mortgage borrowers with relatively high default probabilities are considered

mortgage redlining race risk and demand charges that geographical redlining is widely practiced by mortgage lenders and is associated with racial discrimination have received much attention however empirical research in this area has yet to document a convincing answer to the question of whether redlining even exists much of the previous research in this area has suffered from failure to account for variations in risk and or failure to adequately control for geographical differences in demand this study addresses these problems in an effort to determine whether the disparity in the flow of mortgage credit can be explained by differences in risk and demand the u s mortgage market is operationally efficient with long term mortgage loans made to highly leveraged borrowers at very thin spreads above the lender s cost of funds there has long been controversy however with respect to considerations of equity legislation on this issue began with the fair housing act of 1968 followed by the equal credit opportunity act of 1974 and the home mortgage disclosure act of 1975 hmda it is now over 15 years since passage of the community reinvestment act of 1977 cra this legislation was designed to assure that banks meet the credit needs of neighborhoods in their service areas in recent years much attention in the administration of the cra has been devoted to the issue of racial discrimination in mortgage lending questions still remain as to whether the decisions of mortgage lenders are influenced by the race of the loan applicant or on the racial composition of his neighborhood redlining is the refusal of lenders to make mortgage loans in certain areas regardless of the creditworthiness of the individual loan applicant many studies claim to verify the existence of racially based mortgage redlining the earliest studies were generally carried out by community groups and were rather crudely done for a summary of such studies see benston 1981 several studies appear in professional literature for example see bradbury case and dunham 1989 and hutchinson ostas and reed 1977 from a public policy standpoint these findings if valid would indicate a need for additional regulation to ensure social equality additionally the existence of redlining in the absence of structural defects in the market would conflict

price dynamics among u s electricity spot markets combining recent advances in causal flows with time series analysis relationships among 11 u s spot market electricity prices are examined results suggest that the relationships among the markets vary by time frame in contemporaneous time the western markets are separated from the eastern markets and the electricity reliability council of texas at longer time frames these separations disappear even though electricity transmission between the regions is limited it appears the relationships among markets are not only a function of physical assets such as transmissions lines among markets but by similar and dissimilar institutional arrangements among the markets

cointegration analysis of spot electricity prices insights on transmission efficiency in the western us abstract the us energy policy act of 1992 promoted the development of spot markets for electric power by requiring utilities to open their transmission systems to wholesale power sales in this paper we specify and estimate a vector error correction model using peak and off peak electricity spot prices during 1994 1996 covering 11 regional markets in the western united states and test these prices for evidence of market integration the results show evidence of an efficient and stable wholesale power market

how to decide when experts disagree uncertainty based choice rules in environmental policy environmental economists have traditionally addressed the issue of choice under uncertainty by applying the expected utility hypothesis when policymakers face a panel of experts with widely divergent beliefs the problem may more accurately be described as a case of choice under pure uncertainty arrow and hurwicz 1972 demonstrate that rational choice criteria under pure uncertainty will focus on the extremes of the state space not the midpoint as is typically assumed using nordhaus s dice model uncertainty based choices about global warming policies are evaluated linkages to the safe minimum standard and the precautionary principle are also discussed

how well have social economy financial institutions performed during the crisis period exploring financial and social efficiency in spanish credit unions as social economy financial institutions credit unions have traditionally been considered less efficient than traditional banking entities however like banks and savings banks they have to be as efficient and competitive as possible to survive in today s business environment especially at times of crisis to date there have been very few studies on their efficiency and practically none for the crisis period moreover almost all the existing studies assess only financial efficiency without considering their social function this study examines the levels of both financial and social efficiency in spanish credit unions as well as their main determinants during the recent crisis we apply the two stage double bootstrap data envelopment analysis dea methodology based on panel data corresponding to all the credit unions active in spain between 2008 and 2013 the empirical results indicate that financial and social efficiency achieved an acceptable level although on average the former was slightly greater than the latter we also find that both age and merger and acquisition activity were positively influential on the financial efficiency of credit unions but had a significant negative effect on their social efficiency moreover the regional location of such entities and the financial crisis were also crucial determinants of both types of efficiency our findings are therefore useful for all the stakeholders of credit unions to know if these entities have been efficient according to a double bottom line accounting in the crisis period and hence to maintain successful social management that is compatible with satisfactory financial efficiency

environmental bonds and environmental research in innovative activities abstract this paper considers the incentive to uncover potential future social costs of activities having no historical precedents since ex ante markets in the future external effects of historically unique activities are non existent the private incentives to uncover the possibility of thalidomide type results in such activities is weak the paper discusses the value of sequentially determined environmental bonds as mechanisms for the generation of research funds in these cases and derives measures for the calculation of such bonds

the market valuation effects of the financial institutions reform recovery and enforcement act of 1989 abstract this paper evaluates the stock market effects of events leading to the passage of the financial institutions reforms recovery and enforcement act of 1989 the evidence suggests that the signing of the act by president bush produced positive abnormal returns for both banks and s ls and that the addition of tougher capital standards produced positive returns for s ls in addition the act increased the risk of both banks and s ls

revisiting long run relations in power markets with high res penetration abstract electricity generation from renewable energy resources res has become increasingly significant to reach eu and emissions reduction targets at the same time one of the main eu policy goals has been the creation of a common internal energy market for europe in this paper we focus on these two issues previously studied separately considering their possible interactions we first analyze the long run relationship between day ahead electricity prices and fuel prices natural gas and coal looking at two samples of years characterized by low and high res penetration then we explore the integration of eu markets we show that the electricity fuel nexus found over 2006 2008 changed dramatically over 2010 2014 for the majority of countries considered in particular the long run dependence of electricity from gas and coal prices is much lower in recent years furthermore our results confirm that the considered eu countries are becoming less integrated as res e increases our findings suggest that nationally implemented policies to support renewables are successful in increasing res penetration but they have lessened the linkage among eu markets then making integration more difficult to obtain

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

testing for unit roots in panel data are wages on different bargaining levels cointegrated theoritical considerations suggest that spillover forces equalize wages for similar jobs thus it is expected that firm wages are cointegrated with the corresponding wage rates on an industrial level in this paper we apply various unit root tests to a panel of wage data we show that the familiar techniques can be adopted to this type of data allowing for unobserved heterogeneity and common time effects our results suggest that firm and industry wages both possess a unit root in the autoregressive representation however ther is only weak evidence for a cointegration realtionship

evaluating the market splitting determinants evidence from the iberian spot electricity prices abstract this paper aims to assess the main determinants on the market splitting behaviour of the iberian electricity spot markets iberia stands as an ideal case study where the high level deployment of wind power is observed together with the implementation of the market splitting arrangement between the portuguese and the spanish spot electricity markets logit and non parametric models are used to express the probability response for market splitting of day ahead spot electricity prices as a function of the explanatory variables representing the main technologies in the generation mix wind hydro thermal and nuclear power together with the available transfer capacity and electricity demand logit models give preliminary indications about market splitting behaviour and then notwithstanding the demanding computational challenge a non parametric model is applied in order to overcome the limitations of the former models results show an increase of market splitting probability with higher wind power generation or more generally with higher availability of low marginal cost electricity such as nuclear power generation the european interconnection capacity target of 10 of the peak demand of the smallest interconnected market might be insufficient to maintain electricity market integration therefore pro active coordination policies governing both interconnections and renewables deployment should be further developed

roscas as financial agreements to cope with self control problems abstract we consider a model in which people with limited self control can sign binding financial agreements among themselves thereby forming coalitions we show that these financial agreements may help them to alleviate their self control problems we then demonstrate that there exists a stable structure of coalitions in which people form rotating savings and credit associations roscas we therefore provide a behavioral rationale for one of the most prevalent and puzzling financial institutions in developing countries finally we derive and discuss some empirical predictions

gender biases in bank lending lessons from microcredit in france the evidence on gender discrimination in lending remains controversial to capture gender biases in banks loan allocations we observe the impact on the applicants of a microfinance institution mfi and exploit the natural experiment of a regulatory change imposing a strict eur 10 000 loan ceiling on microcredit descriptive statistics indicate that the presence of the ceiling is associated both with bank mfi co financing and with harsher treatment of female borrowers to investigate causal links we develop an econometric approach that addresses the concerns of selection biases multicollinearity and endogeneity our empirical findings suggest that the change in the mfi s gender related attitude was triggered by banks through co financing hence we speculate that co financing pushes ceiling constrained mfis to import whatever biases in loan granting that the banks are prone to overall this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women s empowerment efforts made by mfis

the growth of us credit unions abstract the growth of us credit unions during the 1990s is investigated empirically using univariate and multivariate cross sectional and panel estimation techniques univariate tests of the law of proportionate effect suggest that in general large credit unions grew faster than their smaller counterparts on average credit unions with above average growth in one period tended to experience below average growth in the next smaller credit unions tended to have more variable growth than large ones while credit unions share a common co operative philosophy they differ in terms of age profile scope for membership growth charter type and financial structure and performance in estimations of a multivariate growth model most of these characteristics are found to have a significant influence on the size growth relationship while large state chartered credit unions grew faster than their smaller counterparts the reverse was true for federally chartered credit unions in general if larger credit unions grew faster than smaller ones they tended to do so for specific reasons because their charters were less restrictive because they were more efficient or because they had a financial structure that was more conducive to growth therefore credit union growth was not random but highly systematic

reassessing the integration of european electricity markets a fractional cointegration analysis this study extends existing literature on the assessment of electricity market integration in europe by developing and testing hypotheses on the convergence of electricity wholesale prices and adopting a time varying fractional cointegration analysis in addition the potential impacts of some special events that may affect system capacity new interconnection market coupling increase in share of intermittent generation on spot and forward markets are considered and evaluated daily spot prices from february 2000 to march 2013 of nine european electricity spot markets apx uk apx nl belpex epex fr epex de ipex nordpool omel and ote and month ahead prices in four markets french british german and dutch from november 2007 to december 2012 are investigated results show that unit root tests which are generally used in the literature to test market integration are inadequate for assessing electricity spot market convergence because spot prices are found to be fractionally integrated and mean reverting time series furthermore spot price behaviour and their association with different markets change over time reflecting changes in the eu electrical system one month ahead prices by contrast were found to have become more resilient to shocks and to follow more stable trends

social multi criteria evaluation methodological foundations and operational consequences in order to address contemporary issues economics and decision sciences need to expand their empirical relevance by introducing more and more realistic thus more complex assumptions in their models one of the most interesting research directions in the field of public economics is the attempt to introduce political constraints interest groups and collusion effects explicitly j j laffont incentives and political economy 2000 the main argument developed here is the proposal of the concept of social multi criteria evaluation smce as a possible useful framework for the application of social choice to the difficult policy problems of our millennium where as stated by funtowicz and ravetz facts are uncertain values in dispute stakes high and decisions urgent this paper starts from the following main questions 1 why social multi criteria evaluation 2 how should such an approach be developed the foundations of smce are set up by referring to concepts from complex system theory and philosophy such as reflexive complexity post normal science and incommensurability to give some operational guidelines on the application of smce basic questions to be answered are 1 how is it possible to deal with technical incommensurability 2 how can we deal with the issue of social incommensurability to answer these questions using theoretical considerations and lessons learned from real world case studies is the main objective of the present article

stock market reactions to the depository institutions deregulation and monetary control act of 1980 abstract this paper evaluates the effects of events leading to the passage of the depository institutions deregulation and monetary control act of 1980 the evidence suggests that the initial proposal of the act by then president carter and the final passage of the act by the house of representatives produced positive abnormal returns to stockholders of large commercial banks stockholders of small commercial banks and small savings and loans on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faced significant negative positive abnormal returns were experienced by stockholders of large small commercial banks

forecasting day ahead electricity spot prices the impact of the exaa to other european electricity markets abstract in our paper we analyze the relationship between the day ahead electricity price of the energy exchange austria exaa and other day ahead electricity prices in europe we focus on markets which settle their prices after the exaa which enables traders to include the exaa price into their calculations for each market we employ econometric models to incorporate the exaa price and compare them with their counterparts without the price of the austrian exchange by employing a forecasting study we find that electricity price models can be improved when exaa prices are considered

multiple criteria decision making combined with finance a categorized bibliographic study abstract this paper provides a categorized bibliography on the application of the techniques of multiple criteria decision making mcdm to problems and issues in finance a total of 265 references have been compiled and classified according to the methodological approaches of goal programming multiple objective programming the analytic hierarchy process etc and to the application areas of capital budgeting working capital management portfolio analysis etc the bibliography provides an overview of the literature on mcdm combined with finance shows how contributions to the area have come from all over the world facilitates access to the entirety of this heretofore fragmented literature and underscores the often multiple criterion nature of many problems in finance

long run relations in european electricity prices this paper analyses the interdependencies existing in wholesale electricity prices in six major european countries the results of a robust multivariate long run dynamic analysis reveal the presence of four highly integrated central european markets france germany the netherlands and austria the trend shared by these four electricity markets appears to be common also to gas prices but not to oil prices the existence of a common long term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across europe and by the same marginal generation technology since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series we also develop a battery of robust inference procedures that should assure the reliability of our results copyright 2009 john wiley sons ltd

discursive ethics in ecosystems valuation and environmental policy abstract discursive ethics has its origin in the frankfurt school of critical theory as an applied ethic it is also associated with practical philosophy in this paper discursive ethics is discussed as a conceptual and practical framework for ecosystems valuation and environmental policy the discussion focuses on three main strengths of discursive ethics 1 it offers an integrated process for ecosystems valuation 2 it offers a decision making framework for responding to uncertainty and risk and the reality of action in indeterminacy 3 it offers a process for deconstructing common valuation concepts and identifying conditions for their critical reconstruction the theoretical discussion is followed by a case study example which illustrates the usefulness of discursive ethics in identifying valuation biases hidden behind disciplinary assumptions and conceptual norms these include cultural norms of rationality information biases which consider hard facts over soft values and disciplinary valuation biases which distinguish between hard and soft expert contributions as the case study illustrates a successful application of discursive ethics in ecosystems valuation and environmental policy demands sensitivity to such underlying biases beyond its policy relevance discursive ethics may also offer a framework for an extended peer discourse through which new foci in research and education can be identified

the effects of additive outliers on tests for unit roots and cointegration this article discusses the properties of the univariate dickey fuller test and the johansen test for the cointegrating rank when there exist additive outlying observations in the time series we provide analytical as well as numerical evidence that additive outliers may produce spurious stationary hence the dickey fuller test will reject a unit root too frequently and the johansen test will indicate too many cointegrating vectors the results easily generalize to models with temporary change outliers through an empirical example we discuss how additive and temporary change outliers can be detected in practice and we show how dummy variables can be used to remove the influence of such extreme observations

an examination of the impact of the garn st germain depository institutions act of 1982 on commercial banks and savings and loans this paper evaluates the effects of events leading to the passage of the garn st germain depository institutions act of 1982 the evidence suggests that the call for reform by president reagan s housing commission and the senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks stockholders of small s ls and banks on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faded significant negative positive abnormal returns were experienced by stockholders of large small s ls and banks this study examines the impact of the passage of the garn st germain depository institutions gsgdi act of 1982 on commercial bank and savings and loan stockholder returns the gsgdi act represents one of two major revisions of the financial system over the last twenty years the other being the depository institutions deregulation and monetary control act of 19801 the proposal for such a change reflected the growing inadequacy of the regulatory structure of financial institutions to adapt to rapid changes in technology shifting consumer demands for financial services and extremely volatile interest rates efforts to reform the financial system resulted in passage of the gsgdi act of 1982 which included provisions seeking to improve both the implementation of monetary policy and the degree of equity in the regulation of financial institutions such improvements were intended to reduce the operational and financial risk of financial institutions a central issue in the economics of regulation is whether regulatory actions benefit the economic agents they are intended to benefit a large body of literature exists which examines the economic effects of regulation much of this literature has utilized the concepts and methods of welfare economics to assess the extent

component estimation for electricity prices procedures and comparisons abstract electricity price time series usually exhibit some form of nonstationarity corresponding to long term behavior one or more periodic components as well as dependence on calendar effects as a result modeling electricity prices requires accounting for both long term and periodic components in the literature several filtering procedures have been proposed but a standard has not yet been found furthermore since different procedures are applied in contexts that are not homogeneous with respect to data periods and final goals a fair comparison is difficult this work considers several methods for component estimation in a homogeneous framework and compares them according to specific criteria the final purpose is to find an estimation procedure that performs well independently of the intended market and that can be proposed as a reference for electricity price time series filtering

size growth and transnationality among the world s largest banks this essay investigates the relationship between size and growth rate of large international banks and then relates these to the banks degree of transnationality we test two sets of three propositions each the first three propositions are pi that the growth rate of each bank over some period is independent of its size p2 that the variability of growth rates is independent of the banks size and p3 that the banks growth rates in two consecutive periods are independent of each other the second three propositions are p4 that there is no association between size and transnationality p5 that transnationality and growth are independent and p6 that there is no relationship between transnationality and the variability of growth rates the growth referred to is primarily that of assets as a measure of size for the two propositions concerning the variability of growth rates we supplement this measure with one of the market value of the banks equity the results have implications for concentration in internathis paper investigates six propositions relating to gibrat s law of proportionate growth the growth referred to is that of book assets and total market value the results have implications for concentration in international banking and for depositor safety and the social cost of insuring it and provide evidence on economies of scale and on the transnational spread of the industry

intertemporal valuation in an unpredictable environment abstract the inherent unpredictability of ecological systems is a vital feature for the development of theories at the interface between economics and ecology such unpredictability is caused by instabilities that are intrinsic parts of ecosystem function succession and evolution the complexity of ecological dynamics undermines the simple probabilistic treatment of uncertainty based on the equilibrium paradigm common in traditional environmental economics we investigate an important alternative by representing the dynamics of the biogeophysical system as an infinite sequence of instabilities this leads to a stochastic process exhibiting an exponentially growing variance our analysis is carried out in a macroeconomic setting in a situation where the value system here formalized in terms of risk averse social welfare functions contains at least two distinct aspects consumption rate and the state of the environment the central variables for intertemporal valuation i e the time dependent expected values of the two welfare function components are calculated using the probability distribution describing the environmental dynamics one result is that if the unpredictability of the environmental dynamics is taken into account then the social discount rate for environmental existence values may well be negative

the valuation effects of the 1977 community reinvestment act and its enforcement abstract we examine the wealth effects of the passage of the community reinvestment act cra of 1977 for commercial banks and savings and loan associations we find significantly negative average excess returns for small nyse amex banks and sl in contrast there is no evidence that large nyse amex institutions or nasdaq institutions experience wealth losses we also study the effects of individual cra protests against institutions and find they produce significantly negative excess returns which are not reversed when the protests are resolved our results have implications for proposed changes to cra and for the future consolidation of the financial services industry the results also demonstrate the difficulties associated with studying returns from the early years of the nasdaq market

safety and soundness and the cra is there a conflict i introduction financial problems often pose a dilemma regarding the appropriate nature and timing of any regulatory response banks and the financial intermediation services they perform generally are viewed as crucial to economic growth and the intermediary role of banks entails potential negative economic consequences of reducing permissible lending activities in response to an adverse financial shock as in bernanke and gertler 1987 equally well known however are the perverse incentives associated with allowing thinly capitalized banks to operate with federally guaranteed deposits as in kaufman 1987 to the extent both views are correct they point to a potential trade off between enhancing the supply of bank credit and promoting safe and sound banking practices in periods of financial difficulty although this type of trade off has been debated and clarified in the context of banking crises its implications for banking regulation more generally are underappreciated in particular limited attention has been given to the potential trade off between the general credit enhancement objective of the community reinvestment act cra and the risk constraining objectives of safety and soundness standards in october 1977 the u s congress passed the cra as title viii of the housing and community development act the legislation is designed to encourage commercial banks and savings associations to help meet the credit needs of their communities in a manner consistent with safe and sound banking practices the cra is often associated with the specific objective of enhancing the availability of credit for low income neighborhoods in a bank s service area however the implementing regulations in accordance with the general nature of the statute also prominently feature general guidelines related to the total volume of lending activity conducted in an institution s market area irrespective of neighborhood income levels at its most fundamental level the cra is concerned with the credit needs of the communities in which banks are chartered that is federal regulators are to use their supervisory authority to encourage institutions to help meet local credit needs as in garwood and smith 1993 since july 1 990 cra ratings have had four levels 1 outstanding 2 satisfactory 3 needs to improve and 4 substantial noncompliance 55 fr 18163 the cra s specific and general credit enhancement objectives are qualified by reference to safe and sound banking practices but the possibility nevertheless arises that favorable cra ratings might reflect aggressive financial strategies designed to support an expansion of lending activity in contrast bank regulators use very different criteria in assigning safety and soundness ratings in 1979 federal agencies adopted the uniform financial institutions rating system the resulting overall or composite safety and soundness ratings originally were derived from the onsite evaluation and rating of five separate factors capital adequacy c asset quality a management m earnings e and liquidity l this camel rating system was amended on 1 january 1997 to include a sixth component 61 fr 67021 the new s component focuses on sensitivity to market risk such as the risk arising from changes in interest rates like the earlier camel rating the camels overall rating has five levels 1 basically sound in every respect 2 fundamentally sound but with modest weaknesses 3 financial operational or compliance weaknesses that cause supervisory concern 4 serious financial weaknesses that could impair future viability and 5 critical financial weaknesses that render the probability of near term failure extremely high for simplicity this study applies the term camel to both camel and camels ratings in contrast to cra ratings the camel rating system clearly is directed at containing risk given the opposing perspectives on bank credit underlying cra and safety and soundness ratings in addition to the bank level costs associated with cra compliance efforts current regulatory policies entail a potential conflict

measuring market integration and estimating policy impacts on the swiss electricity market abstract we investigate market integration in central western european electricity markets with a focus on switzerland we propose a structural microeconometric approach to measuring the degree of market integration taking advantage of unilateral demand and supply shocks such as the generation from volatile renewable resources the unavailability of generation units and national holidays these exogenous events affect electricity prices in switzerland and allow estimating the level of market integration by disentangling their effects in congested and non congested situations exploiting information on congested and non congested situations in parametric instrumental variable estimation permits simulating hypothetical non congested swiss electricity prices in historically congested situations our approach allows considering the non linear nature of level shifts of congestion and disentangling it from the structurally different interplay of demand and supply in respective situations using data on hourly electricity prices and its determinants regarding switzerland and neighboring countries from 2015 and 2016 we find that an expansion of interconnector capacity at the german austrian swiss border could decrease swiss electricity prices substantially in a more attenuated way the same holds true for the french swiss and the italian swiss border for switzerland as a whole prices in congested situations are about 17 higher than hypothetical non congested prices

a flexible assurance bonding system for improved environmental management abstract current methods of regulating activities that are known or suspected to be environmentally danaging are not working well they induce legal confrontation obfuscation and government intrusion into the inner workings of firms they tend to suppress technical and social innovation aimed at long term solutions they do not mesh well with the market signals that firms use to make decisions this paper discusses some of the underlying reasons for this problem and outlines a flexible environmental assurance bonding system designed to incorporate environmental criteria and uncertainty into the market system and to induce positive environmental technological innovation in addition to direct charges for known environmental damages an assurance bond equal to the current best estimate of the largest potential future environmental damages would be levied and kept in an interest bearing escrow account the bond plus a portion of the interest would be returned if and only if the firm could prove that the suspected damages had not occured or would not occur if damages did occur the bond would be used to rehabilitate or repair the environment and to compensate injured parties by requiring the users of environmental resources to post a bond adequate to cover potential future environmental damages with the possibility for refunds the burden of proof is shifted from the public to the resource user and a strong economic incentive is provided to research the true costs of environmentally innovative activities and to develop innovative cost effective pollution control technologies

carbon risk carbon risk awareness and the cost of debt financing we seek insights into potential benefits for firms adopting strategies to improve business sustainability in a carbon constrained future we investigate whether lenders incorporate a firm s exposure to carbon related risk into lending decisions through the cost of financing and if so importantly whether firms can mitigate the penalty by demonstrating an awareness of their carbon risks we use a sample of 255 firm year observations from eight industries over the period 2009 2013 we measure carbon related risk exposure as the firm s historical carbon emissions and our primary measure of carbon risk awareness is based on the firm s willingness to respond to the carbon disclosure project cdp survey we document a positive association between cost of debt and carbon risk for firms failing to respond to the cdp further this association is economically meaningful with a one standard deviation increase in carbon risk mapping into between a 38 and 62 basis point increase in the cost of debt equally we find that this penalty is effectively negated for firms exhibiting carbon risk awareness our results are robust when we consider alternate measures of carbon awareness disclosure through alternative medium to the cdp and firms annual cash investment in new capital assets using cleaner technology our results highlight not only the importance of carbon awareness as a business strategy for polluting firms but also its importance to lenders exposed to their clients default and reputational risk the debt market appears to incorporate historical carbon emissions and forward looking indicators of carbon performance

bank acquisition and stockholders wealth abstract bank mergers are a control mechanism for reallocating resources because regulation has a pervasive influence on bank decision making unlike industrial firms bank mergers are subject to regulatory approval bank shareholder returns are analyzed at the time of federal reserve approval of mergers to assess whether regulation reduces differential information between bank managers and outsiders or reduces managers ability to take advantage of differential information empirical tests indicate there are negative returns to acquiring banks for external mergers but normal returns for internal mergers emergency mergers generate positive returns before and upon announcement more negative results occur in states with branching restrictions and in cases when equity financing is used

investing in electricity production under a reliability options scheme abstract reliability options ros are used to enhance the security of supply in electricity systems when a power producer writes a ro s he agrees to set a cap on the price of electricity that s he cashes in return the system operator i e the party that is buying the option pays to the option issuer a fixed premium in this paper we analyze how ros affect the timing and value of investments in the energy sector and we show under what conditions they can be used as investment stimuli we prove that contrarily to what is expected ros can potentially harm the security of supply by delaying the adoption of new capacity and by reducing the value of investing in it to avoid such a result a careful setting of the relevant parameters is needed

multivariate volatility modeling of electricity futures the deregulation of european electricity markets has led to an increasing need in understanding the volatility and correlation structure of electricity prices we model a multivariate futures series of the european energy exchange eex index using an asymmetric garch model for volatilities and augmented dynamic conditional correlation dcc models for correlations in particular we allow for smooth changes in the unconditional volatilities and correlations through a multiplicative component that we estimate non parametrically we also introduce exogenous variables in our new multiplicative dcc model to account for congestion in short term conditional volatilities we find different correlation dynamics for long and short term contracts and the new model achieves higher forecasting performance compared to a standard dcc model

price and volatility dynamics between electricity and fuel costs some evidence for spain abstract the purpose of this study is to investigate the causal linkages between the spanish electricity brent crude oil and zeebrugge belgium natural gas 1 month ahead forward prices following lutkepohl et al 2004 we control for the presence of a structural change in the series and then we use the johansen cointegration test and a vector error correction model vecm to embrace the analysis additionally a multivariate generalized autoregressive conditional heteroskedastic garch model is applied to explore volatility interactions between the three markets involved in the study our findings reveal that brent crude oil and zeebrugge natural gas forward prices play a prominent role in the spanish electricity price formation process furthermore causation both in price and volatility runs from brent crude oil and natural gas forward markets to the spanish electricity forward market these results are of practical importance for both the wholesale and retail markets participants as well as the regulator through the established link between the forward contracts price and the spanish tariff of last resort paid by more than 23 million of customers

decision making under environmental uncertainty abstract the paper s main concern is with different decision making models for environmental issues and with the hypotheses of rationality underlying such models the hypothesis supported here is that most environmental problems are in a context of uncertainty of irreversibility and of complexity we shall explain why stressing the role of these elements implies a reversal of the traditional attitude towards decision making this presupposes a paradigm of economic rationality much broader that that of orthodox economics called procedural rationality our paper is in two parts the first part concerns the limits of the stochastic environmental approaches based on the bayesian decision theory and on a substantive rationality hypothesis the second part concerns the decision making analyses based upon a procedural rationality as well as their ability to take account of the interactions between uncertainty irreversibility and complexity

efficiency and applicability of economic concepts dealing with environmental risk and ignorance abstract the paper examines the efficiency and applicability of various economic concepts dealing with environmental uncertainty their applicability is analysed by classifying environmental uncertainty according to different criteria using such a structure it can be shown that while the economic concepts are able to deal satisfactorily with some types of environmental uncertainty they are unable to deal with others adequately the analysis of efficiency distinguishes between environmental risk in which the decision maker is aware of the distribution function of the random variables and ignorance in which the decision maker does not know the relevant distribution functions the concept of a risk premium proposed by siebert the policy recommendation to promote integrated technologies and the environmental assurance bonding system developed by costanza and perrings are examined in terms of efficiency and applicability the analysis reveals the following i the application possibilities of the three concepts differ significantly ii a concept which concentrates on the reduction of risk may lead to an increase in ignorance iii while an economic concept may be efficient in the context of risk it can be inefficient when ignorance exists iv a trade off exists between the possibility to precisely state whether an economic concept is efficient and the scope of its applicability

limits to environmental bonds abstract bonds have recently been promoted as an alternative tool to control environmental damages particularly in those instances when the innovative activities of a firm have uncertain future impacts under this mechanism a firm would post a bond ex ante forfeiting all or a portion of the bond if its activities harmed environmental resources while the benefits of bonds have been developed there has been little systematic effort to explore their limitations in contrast the labor literature has extensively studied the limits of bonds as a mechanism to prevent worker shirking using insights from this parallel problem this paper explores the limits to environmental bonds focusing on the problems of moral hazard liquidity constraints and legal restrictions each limit offers a challenge to the success of environmental bonds we explore the use of bonds in surface mining and agricultural nonpoint pollution as motivating examples we also consider how other incentive schemes suggested by the labor literature might prove useful in the context of environmental management we consider the labor mechanisms of efficiency wages increasing wage profiles trust funds and rank order tournaments

protecting the environment when costs and benefits are privately known in this survey i analyze different approaches for protecting the environment when stakeholders are privately informed about the costs and benefits of pollution reduction the presence of asymmetric information calls for some important departures from the textbook prescriptions of marketable permits and emission taxes for controlling pollution for instance it may no longer be optimal to equate the social marginal benefits to the marginal cost of cleanup in determining appropriate abatement levels i conclude this review with some suggestions for future research in this area

electricity wholesale market prices in europe convergence abstract this paper tests the hypothesis that the ongoing restructuring process in the european electricity sector has led to a common european market for electricity based on a principal component analysis pca of wholesale electricity prices in 2002 2006 we reject the assumption of full market integration for several pairs of countries the weaker hypothesis of bilateral convergence is accepted based on unit root tests kpss and adf and a convergence test based on filtered pairwise price relations this indicates that the efforts to develop a single european market for electricity were so far only partially successful we show that the daily auction prices of scarce cross border transmission capacities are insufficient to explain the persistence of international price differentials empirically our findings confirm the insufficiency of explicit capacity auctions as stated in the theoretical literature

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

a credit score system for socially responsible lending ethical banking microfinance institutions or certain credit cooperatives among others grant socially responsible loans this paper presents a credit score system for them the model evaluates social and financial aspects of the borrower the financial aspects are evaluated under the conventional banking framework by analysing accounting statements and financial projections the social aspects try to quantify the loan impact on the achievement of millennium development goals such as employment education environment health or community impact the social credit score model should incorporate the lender s know how and should also be coherent with its mission this is done using multi criteria decision making mcdm the paper illustrates a real case a loan application by a social entrepreneur presented to a socially responsible lender the decision support system not only produces a score but also reveals strengths and weaknesses of the application

estimating temperature effects on the italian electricity market abstract this paper provides empirical evidence of the effects that weather conditions exert on the electricity market offering a new contribution to the understanding of hourly regional price formation in the day ahead market in italy the empirical estimation uses a new data set of hourly data on both market variables and temperature variables there is a vast body of literature on the effect of temperature on final consumers and on wholesale electricity market equilibrium however the influence of temperature on the behavior of the wholesale electricity market has not been studied at the hourly level a new econometric estimation shows some evidence of different effects of temperature and provides a more accurate estimation of the hourly prices forecasting out of sample performance of the model is satisfactory the present results have welfare improving policy implications because appropriate policy strategies can help public decision makers promote regulation such as issuing public weather alert and designing contingent plans to face extreme weather conditions which improves production efficiency network management and consumer saving behavior taking specific weather conditions into account

germany s nuclear power plant closures and the integration of electricity markets in europe this paper examines the potential implications of national policies that lead to a sudden increase of wind power in the electricity mix for interconnected european electricity markets more specifically it examines market integration before and after the closures of eight nuclear power plants that occurred within a period of a few months in germany during 2011 the short and long run interrelationships of daily electricity spot prices from november 2009 to october 2012 in apx endex belpex epex de epex fr nordpool omel and swissix and wind power in the german system are analysed two mgarch multivariate generalized autoregressive conditional heteroscedasticity models with dynamic correlations are used to assess spot market behaviour in the short run and a fractional cointegration analysis is conducted to investigate changes in the long run behaviour of electricity spot prices results show positive time varying correlations between spot prices in markets with substantial shared interconnector capacity a negative association between wind power penetration in germany and electricity spot prices in the german and neighbouring markets and for most markets a decreasing speed in mean reversion

an analysis of intra industry differences in the effect of regulation the case of deposit rate ceilings abstract this study examines the impact of deposit rate ceiling changes on the market value of commercial banks and stock savings and loan associations statistically significant increases in market value are found on announcement of the removal of ceilings on large denomination certificates of deposit in contrast retail commercial banks and savings and loans experienced declines in value on announcement of the elimination or relaxation of deposit rate ceilings on small denomination consumer accounts in addition for all events analyzed significant differences were found in the effect of ceiling changes on the market value of wholesale and retail commercial banks

deregulation of the nordic power market and environmental policy abstract a common nordic power market will reduce total co 2 emissions in the nordic countries as compared to a situation of autarky and thus reduce the aggregate cost of complying to strict national co 2 emission targets a common market for co 2 emission permits may reduce the aggregate cost further but this cost reduction will be smaller the harsher the co 2 emission constraints are the economic gain of introducing a common nordic power market will be particularly large in the case of a swedish nuclear power phase out in this case the cost reduction of introducing a common market for co 2 emission permits will not be very large