strategic demand side response to wind power integration this paper explores the effects of allowing large price responsive consumers to provide reserves in a power system with significant penetration of wind energy a bilevel optimization model represents the utility maximization problem of a large consumer subject to a stochastic day ahead co optimization of energy and reserves that a system operator would solve to clear the market while considering wind power uncertainty an examination of the market outcomes from both an illustrative and a large scale study using this model allows analysis of a the effects of the type of behavior of the large consumer i e strategic vs competitive b limits on the amount of reserves it is allowed to provide and c variability and accuracy of characterization of wind power uncertainty

the hazard of moral hazard untangling the asian crisis abstract the paper critically examines the explanations of the asian crisis which emphasize the role of national policies and institutions that allegedly created moral hazard by overprotecting the investors industrial policy crony capitalism and government guarantees accorded to banks and industrial firms that are considered too important to fail we also discuss the international dimension of the moral hazard argument in the presence of international monetary fund imf bail out the paper finds these explanations theoretically ill defined and empirically weak and argues that the prescriptions for changes in policy and institutions based on them are unlikely to prevent similar kinds of crises in the future

measuring the financial impact of demand response for electricity retailers abstract due to the integration of intermittent resources of power generation such as wind and solar the amount of supplied electricity will exhibit unprecedented fluctuations electricity retailers can partially meet the challenge of matching demand and volatile supply by shifting power demand according to the fluctuating supply side the necessary technology infrastructure such as advanced metering infrastructures for this so called demand response dr has advanced however little is known about the economic dimension and further effort is strongly needed to realistically quantify the financial impact to succeed in this goal we derive an optimization problem that minimizes procurement costs of an electricity retailer in order to control demand response usage the evaluation with historic data shows that cost volatility can be reduced by 7 74 peak costs drop by 14 35 and expenditures of retailers can be significantly decreased by 3 52

altruism and time consistency the economics of fait accompli this paper analyzes the strategic and intertemporal interaction between two economic agents who have overlapping concerns such as altruistic concerns for each other s welfare the agents may be two individuals a social bureau and a client or two units in an organization we show how the presence of such common concerns may lead to socially inefficient outcomes in which one economic agent free rides on the other s concern we also briefly how this inefficiency and free riding in the context of interaction between individuals might be mitigated by compulsory social security systems as another example we interpret the inefficiency in terms of kornai s soft budget constraints within organizations

debt maturity and the international financial architecture this paper presents a theory of the maturity of international sovereign debt and derives its implications for the reform of the international financial architecture the analysis is based on a model in which the need to roll over external debt disciplines the policies of debtor countries but makes them vulnerable to unwarranted debt crises due to bad shocks the paper presents a welfare analysis of several measures that have been discussed in recent debates such as international lending in last resort or the establishment of a mechanism for suspending payments on the external debt of crisis countries jel f34 o19

purchase bidding strategy for a retailer with flexible demands in day ahead electricity market the paper aims to determine the day ahead market bidding strategies for retailers with flexible demands to maximize the short term profit it proposes a short term planning framework to forecast the load under dynamic tariffs and construct biding curves stochastic programming is applied to manage the uncertainties of spot price regulating price consumption behaviors and responsiveness to dynamic tariffs a case study based on data from sweden is carried out it demonstrates that a real time selling price can affect the aggregate load of a residential consumer group and lead to load shift toward low price periods the optimal bidding curves for specific trading periods are illustrated through comparing the bidding strategies under different risk factors the case study shows that a risk averse retailer tends to adopt the strategies with larger imbalances the benefit lies in the reduction of low profit risk however the aversion to risk can only be kept in a certain level a larger imbalance may lead to a quick reduction of profit in all scenarios

collective action clauses how do they affect sovereign bond yields abstract we study the effects of the adoption of collective action clauses cacs on government bond yields by exploiting secondary market data on sovereign bonds quoted in international markets from march 2007 to april 2011 cacs are assessed security by security using a panel data approach we find a u shaped effect of cacs on yields according to the credit rating of the issuer while the impact is negligible for the highest ratings a significant yield discount emerges for mid range ratings which is smaller for bad ratings and possibly insignificant for the worst ratings this relationship appears fairly robust across a number of checks this evidence may reflect the fact that cacs are valuable because they help with orderly restructuring unless the perceived probability of default is too small nevertheless at low ratings this effect can be weakened by an increasing risk of moral hazard

hares and stags in argentinean debt restructuring abstract the latest argentinean debt restructuring was the first time the resolution of a modern financial crisis was completely handed over to the private financial markets without official intervention by public institutions we argue that the resulting harshest haircut for private creditors in history can be at least partially related to a stag hunt game played by creditors we show that incentive schemes provided by the argentinean government were factors facilitating this haircut the analysis suggests that contrary to the recognition in the literature the effects of collective action clauses and exit consents within a restructuring process are not equal in the case of argentina the inclusion of collective action clauses in the defaulted bonds could have benefited the holdout creditors

sovereign debt restructuring since the early 1980 s patterns of emergingmarket finance have changed significantly greater integration of capital markets and a trend toward a greater use of direct lending through bonds has led to relatively decreased use of indirect finance through syndicated bank loans these changes have produced benefits to investors through opportunities for risk diversification and to emerging market sovereign borrowers by increasing the investor base the broadened investor base in bond financing however raises problems of coordination and collective action in the event of a sovereign borrower s default and restructuring now three parties are involved in determining the debt markdown required to produce solvency the debtor creditors and the global taxpayer through international financial institutions ifi s the complex relationships among the borrowers creditors and the global taxpayer have made restructuring obligations a costly and time consuming exercise especially with the possibility of holdouts both the sovereign borrower and its creditors have an incentive to avoid a restructuring in the hope of financial assistance from the global taxpayer sovereign governments may not undertake the politically painful steps involved in beginning a restructuring when there is always the hope that official assistance will be forthcoming creditors may not accept a reduction in the value of their claims also in the hope that official assistance will be forthcoming costs of postponed and disorderly restructurings are real and substantial delays in restructuring can drain a country s resources and increase the ultimate costs of restoring financial sustainability creditors bear a burden as well because the losses associated with the restructuring are reflected in values of

samaritan agents on the strategic delegation of aid policy abstract should a donor delegate the responsibility for allocating its aid budget to a less inequality averse agent to alleviate the consequences of the samaritan s dilemma it is facing i show that when aid impact differs across recipients the optimal type of agent depends on whether or not committing to a greater share for countries where the productivity of aid is low raises the combined domestic incomes of recipients this is the case for donors too concerned with efficiency ex post they therefore delegate the decision on the discretionary aid allocation rule to agents more sensitive to distributional issues than themselves

price maker bidding in day ahead electricity market for a retailer with flexible demands this study develops a short term planning model to determine the bidding curves on a day ahead market for a price maker retailer with flexible power demand it concerns the interactions between the spot price and the flexible demand both conditional value at risk and volume deviation risk are taken into account a numerical study using the data from the nordic electricity market is performed to investigate the influence of risk factors on the retailer s profit risk levels average spot price and total consumption three types of price elasticity are compared to show that the retailer can benefit from the flexibility in demand side in some cases the flexibility also leads to lower spot prices so that the customers in real time price based demand response can face a lower electricity price for per unit power consumption

sovereign insolvency procedures a comparative look at selected proposals abstract the most practicable short term approaches for sovereign debt restructuring would include a code of conduct voluntary approach and collective action clauses contractual approach in the medium term a sovereign insolvency procedure statutory approach may have an important role to play because it would be a comprehensive instrument designed to coordinate different creditor groups prior to and during a debt crisis this paper provides a survey of six comprehensive policy proposals for a sovereign bankruptcy procedure it points to approaches that could improve existing proposals and creates a basis for new proposals which could prove conducive to reaching political consensus

food aid a cause of development failure or an instrument for success the role of food aid in furthering the economic development of poor countries and in alleviating the adverse effects on the poor of structural and sectoral adjustment programs is discussed a simple analytical framework for evaluating the incentive and welfare impact of food aid is suggested domestic and international markets for food historically have been subject to severe distortions leading to ever growing food stocks in some mainly rich countries while in others largely poor many cannot afford to consume enough food the possible impact of distortion free global food markets is sketched the use of surplus food for payment of wages in rural work programs has often been proposed as a means to create productive assets while alleviating poverty using an applied general equilibrium model of the indian economy it is shown that a well designed and efficiently implemented food for work program can virtually eliminate abject poverty in india at a modest cost experience with food aid in several other countries is also briefly discussed

sovereign default private sector creditors and the ifis abstract the data reveal that emerging market sovereign borrowing from international financial institutions ifis is small intermittent and countercyclical compared to that from private sector creditors the ifi loan contracts offered to sovereigns differ from the private ones in that they are more enforceable and have conditionality arrangements attached to them taking these contractual differences as given this paper builds a quantitative model of a sovereign borrower and argues that better enforceability of ifi loan contracts is the main institutional feature that explains the size and cyclicality while conditionality accounts for the intermittency of borrowing from the ifis

addressing the food aid curse abstract the food aid curse arises because humanitarian aid agencies that are devoted to save lives cannot commit not to intervene in case of man made famines we propose a solution to this curse in models of agrarian economies with kleptocratic governments

modeling real time balancing power market prices using combined sarima and markov processes this paper describes modeling of real time balancing power market prices by using combined seasonal auto regressive integrated moving average sarima and discrete markov processes the combination of such processes allows generation of price series with periods where no demand for balancing power exists the purpose of the model is simulation of prices to construct scenario trees representing possible realization of the stochastic prices such scenario trees can be used in planning models based on stochastic optimization to generate bid sequences to the balancing market the spread of the prices in the tree and the shape of the scenarios are of central importance model parameter estimation methods reflecting the demands on scenario trees have therefore been used the proposed model is also applied to data from the nordic power market the conclusion of this paper is that the developed model is appropriate for modeling real time balancing power prices

volatility of power grids under real time pricing the paper proposes a framework for modeling and analysis of the dynamics of supply demand and clearing prices in power systems with real time retail pricing and information asymmetry characterized by passing on the real time wholesale electricity prices to the end consumers real time pricing creates a closed loop feedback system between the physical layer and the market layer of the system in the absence of a carefully designed control law such direct feedback can increase sensitivity and lower the system s robustness to uncertainty in demand and generation it is shown that price volatility can be characterized in terms of the system s maximal relative price elasticity defined as the maximal ratio of the generalized price elasticity of consumers to that of the producers as this ratio increases the system may become more volatile since new demand response technologies increase the price elasticity of demand and since increased penetration of distributed generation can also increase the uncertainty in price based demand response the theoretical findings suggest that the architecture under examination can potentially lead to increased volatility this study highlights the need for assessing architecture systematically and in advance in order to optimally strike the trade offs between volatility robustness and performance metrics such as economic efficiency and environmental efficiency

restructuring sovereign debt this paper provides new empirical evidence relevant to the debate over the desirability of reforms to the way that financial markets and the international community deal with sovereign debt crises in particular given the ongoing opposition of investors and some sovereigns to greater use of collective action clauses cacs in emerging market bonds we present new evidence on the way that financial markets have priced the use or non use of cacs

retailers risk management and vertical arrangements in electricity markets the failure of the asset light retailer s organizational model is indicative of the incapacity of this organizational structure to manage efficiently the combination of sourcing and market risks in the current market environment because of the structural dimensions of electricity s market risks a retailer s level of risk exposure is unknown ex ante and will only be revealed ex post when consumption is known in contrast to the textbook model of electricity reforms the paper demonstrates through numerical simulations that in the current market context pure portfolios of contracts are incomplete risk management instruments compared to physical hedging the latter is critical to overcome the asset light retailer s curse

price maker economic bidding in two settlement pool based markets the case of time shiftable loads in this paper a new scenario based stochastic optimization framework is proposed for price maker economic bidding in day ahead and real time markets the presented methodology is general and can be applied to both demand and supply bids that is no restrictive assumptions are made on the characteristics of the pool and its agents however our focus is on the operation of time shiftable loads with deadlines because they play a central role in creating load flexibility and enhancing demand response and peak load shaving programs both basic and complex time shiftable load types are addressed where the latter includes time shiftable loads that are uninterruptible have per time slot consumption limits or ramp constraints or comprise several smaller time shiftable subloads four innovative analytical steps are presented in order to transform the originally nonlinear and hard to solve price maker economic bidding optimization problem into a tractable mixed integer linear program accordingly the global optimal solutions are found for the price and energy bids within a relatively short amount of computational time a detailed illustrative case study along with multiple case studies based on the california energy market data are presented it is observed that the proposed optimal price maker economic bidding approach outperforms optimal price maker self scheduling as well as even load distribution

sovereign liquidity crises the strategic case for a payments standstill is sovereign borrowing so different from corporate debt that there is no need for bankruptcy style procedures to protect debtors with the waiver of immunity sovereign debtors who already face severe disruption from short term creditors grabbing their currency reserves are also exposed to litigious creditors trying to seize what assets they can in a race of the vultures shielding sovereign debtors from inter creditor conflict by authorised standstills on payments doubt less runs some risk of debtor s moral hazard but the lack of an orderly procedure for resolving sovereign liquidity crises means that the imf is de facto forced to bail out countries in trouble this leads to both debtor and creditor moral hazard as investors lend without monitoring knowing that their investments are essentially guaranteed the strategic case for legalising standstills is to rescue the international financial system from this time consistent trap

optimal debt structure and the number of creditors within an optimal contracting framework we analyze the optimal number of creditors a company borrows from we also analyze the optimal allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts the key to our analysis is the idea that these aspects of the debt structure affect the outcome of debt renegotiation following a default debt structures that lead to inefficient renegotiation are beneficial in that they deter default but they are also costly if default is beyond a manager s control the optimal debt structure balances these effects we characterize how the optimal debt structure depends on firm characteristics such as its technology its credit rating and the market for its assets

famines and economics famines have happened with and without crop failures or wars but they invariably entail a collapse in the command over food of vulnerable subgroups within a society whether through loss of endowment or a contraction in the amount of food that can be acquired from given endowments thus economic analysis can help understand famines viewed as tragic aperiodic magnifications of normal market and governmental failures recent literature in economics and other fields has reflected this change in the conceptualization of famines and it has come with policy implications for famine relieve and prevention

kleptocracy and divide and rule a model of personal rule many developing countries have suffered under the personal rule of kleptocrats who implement highly inefe cient economic policies expropriate the wealth of their citizens and use the proceeds for their own glorie cation or consumption we argue that the success of kleptocrats rests in part on their ability to use a divide and rule strategy made possible by the weakness of institutions in these societies members of society need to cooperate in order to depose a kleptocrat yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move and redistributing the benee ts to those who need to agree to it thus the collective action problem can be intensie ed by threats which remain off the equilibrium path in equilibrium all are exploited and no one challenges the kleptocrat kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents when opposition groups are shortsighted when the average productivity in the economy is low and when there is greater inequality between producer groups because more productive groups are more dife cult to buy off jel o12 h00

convergence of volatile power markets with price based demand response price based demand response dr program is a mechanism for encouraging electricity consumers to dynamically manage their energy consumptions in response to time varying electricity prices and thereby reduce peak electricity demands and alleviate the pressure to power systems however it brings additional dynamics and new challenges to the real time supply and demand balance specifically if real time price based dr programs are widely deployed in the future price sensitive dr load levels would constantly change in response to dynamic real time prices which will impact the economic dispatch ed schedule and in turn affect electricity market clearing prices this paper adopts two methods for examining the impacts of different dr price elasticity characteristics and dr participation levels on the convergence of volatile power market a closed loop iterative simulation method and a non iterative method based on the contraction mapping theorem in this paper convergence refers to the fact that load and or price values will finally converge to a fixed point after a finite number of iterations between the ed problem and the price sensitive dr load adjustment five price sensitive dr performance function categories are used to simulate different nonlinear price elasticity characteristics of dr loads numerical studies illustrate how the convergence status of power markets will be affected by the nonlinear price elasticity dr curves the dr penetration levels and the capacity limits of generating units

aid investment and incentives promoting productive investment and economic growth are among the key objectives of most aid organizations operating in poor countries however it is not possible to conclude from existing empirical evidence that aid contributes positively to growth in this paper it is shown that those rather negative results may be explained by important incentive problems built into the aid system itself the recipient countries own efforts to contribute to investment and growth may in reality be undermined and the result may be aid dependency

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

residual demand curves for modeling the effect of complex offering conditions on day ahead electricity markets residual demand curves rdcs can be used to represent the strategic interaction of participants in electricity markets rdcs relate the energy that an agent can buy or sell in one hour with the clearing market price that would be obtained in such hour assuming the market is organized as simple bid independent auctions despite the fact that they have been widely used in the literature the existence of time and or spatial constraints in the market clearing algorithm makes the rdcs not directly applicable this paper tries to overcome these difficulties by extending the concept of rdcs to zonal pricing markets where complex offering conditions and transmission constraints are taken into account therefore the rdcs are redefined in order to capture such effects which are usually neglected or oversimplified a new method for computing the redefined rdcs is established and its application to the iberian electricity market is presented the results show that modeling complex conditions and transmission constraints in rdcs can have a significant effect when compared to the standard approach found in the literature therefore the method presented in this paper modeling the effect of firm s decisions on market prices in a more accurate way

the imf s unmet challenges the international monetary fund is a controversial institution whose interventions regularly provoke passionate reactions we will argue that there is an important role for the imf in helping to solve information commitment and coordination problems with significant implications for the stability of national economies and the international monetary and financial system in executing these functions the effectiveness of the imf like that of a football referee depends on whether the players see it as competent and impartial we will argue that the fund s perceived competence and impartiality and hence its effectiveness are limited by its failure to meet four challenges concerning the quality of its surveillance of individual countries groups of countries and the global system the relevance of conditionality in loan contracts the utility of the fund s approach to debt problems and the fund s failure to adopt a system of governance that gives appropriate voice to different stakeholders these problems of legitimacy will have to be addressed in order for the imf to play a more effective role in the 21st century

moral hazard asset price bubbles capital flows and the east asian crisis the first tests we examine the view that the recent east asian crisis was precipitated by bursting asset price bubbles which had been fuelled by strong capital inflows that were largely the result of a moral hazard problem in financial intermediation and was exacerbated by a vicious cycle of asset price deflation and incipient and actual capital flight we find evidence of stock market bubbles in all east asian economies examined although not in australia we examine various categories of capital flows to these countries and find in particular relatively high reversible components in portfolio flows to east asian economies