carbon dioxide emissions and governance a nonparametric analysis for the g 20 this paper applies nonparametric estimators to examine countries carbon dioxide co2 emissions and governance relationship by using data for the time period 1996 2010 of the twenty largest economies group of twenty g 20 the dynamics of the considered relationship are analyzed six governance measures are included in our analysis voice and accountability political stability and absence of violence government effectiveness regulatory quality rule of law and control of corruption as have been defined in world governance indicators from the world bank the empirical findings reveal a nonmonotonic relationship between countries co2 emissions and the examined governance measures in addition and with respect to the environmental policy makers a significant difference on the number of governance measures influencing countries carbon dioxide emissions which is subject to countries specific regional and development variations is recorded finally the carbon dioxide emissions governance relationship is highly nonlinear and appears that countries higher governance quality does not always result to lower carbon dioxide emission levels

maritime oil freight flows to 2050 delphi perceptions of maritime specialists abstract this paper aims to synthesise maritime specialists perceptions of changing patterns of maritime oil freight flows to 2050 debate spans published maritime oil flows globally diverse drivers of future flows including economic growth shipping market changes and haul lengths a classic delphi study to explore the perceptions of likely trends and flows to 2050 recruited a panel of early career and established maritime specialists many with long term career commitments to this industry underpinned by market volatility and legislative uncertainty the perceptions of both groups coincided and were conservative local sourcing new arctic seaways and fossil fuel intolerance will tend to reduce oil freight work but perceptions of ship re routing to avoid for example emission control areas and piracy would tend to lengthen hauls in advanced industrial nations reducing energy intensities and diminishing social tolerance of fossil fuels imply gradually reducing maritime oil shipments however to achieve radical national commitments to carbon emissions reductions will necessitate specialist education for naturally conservative maritime professionals and vigorous oil import reduction policies to curtail domestic demand for oil shipments

an appraisal of alternative blueprints for international policy coordination this paper examines two schemes for the international coordination of macroeconomic policy using a world econometric model the national institute global econometric model the first is the extended target zone scheme proposed by j williamson and m miller 1987 which involves targeting fundamental equilibrium exchange rates using monetary policy and using fiscal policy to control domestic demand the second uses fiscal policy to target the current account and monetary policy to stabilize domestic demand both schemes are parameterized using optimal control techniques on the national institute global econometric model and the welfare gains in using these schemes compared to historical experience from 1974 to 1986 are assessed

integration of carbon risks and opportunities in enterprise risk management systems evidence from australian firms this study addresses managerial perceptions of risks and opportunities related to carbon pricing and emission management and the factors that affect the extent to which carbon related risks and opportunities are integrated into the organisation s formal enterprise risk management erm system we assess the role played by internal governance features resource availability managerial perceptions on competitive pressures and industry type on the inclusion of carbon risks within the erm system based on survey responses from 96 senior managers in australian carbon intensive firms i e firms listed in the 2009 publication of data under section 24 of the national greenhouse and energy reporting nger act 2007 we find that the extent of carbon risk integration is positively associated with the existence of a formal carbon strategy senior management involvement internal audit oversight resource personnel and funds availability and energy sector membership the paper also provides several insights into the perceptions of risks and opportunities confronting an organisation as a result of carbon pricing mechanism

inflation financial markets and long run real activity abstract empirical evidence suggests that real activity the volume of bank lending activity and the volume of trading in equity markets are strongly positively correlated at the same time inflation and financial market activity are strongly negatively correlated in the long run as are inflation and the real rate of return on equity inflation and real activity are also negatively correlated in the long run particularly for economies with relatively high rates of inflation we present a monetary growth model in which banks and secondary capital markets play a crucial allocative function we show that at least under certain configurations of parameters the predictions of the model are consistent with these and several other observations about inflation finance and long run real activity

german dominance in the ems evidence from interest rates abstract the paper presents an empirical analysis of german dominance and asymmetries in the ems based on a dynamic system of equations explaining national money market interest rates the hypothesis of strict german dominance of the ems is rejected however there are some noticeable asymmetries in the ems germany is a relatively strong player and has been the least dependent country in the early phase of the system since 1983 german independence has diminished in contrast france throughout and italy in the early phase of the ems have been relatively weak players in the system

exchange rate behaviour under the ems regime was there any systematic change abstract most empirical studies fail to detect any systematic effects of the ems regime on the economic performance of member countries this reveals the difficulty of constructing controlled experiments which can distinguish what is due to the ems from that due to common external pressures we argue that the crucial step is to examine the exchange rates distribution since no performance improvements will appear if exchange rate behaviour does not change within the ems we find that there are changes in the third and fourth moments which imply that ems currencies have become more fragile and susceptible to shocks particularly negative shocks relative to non ems currencies

constructing post carbon institutions assessing eu carbon reduction efforts through an institutional risk governance approach this paper examines three different governance approaches the european union eu and member states ms are relying on to reach a low carbon economy by 2050 current governance literature explains the operational methods of the eu s new governance approach to reduce carbon emissions however the literature neglects to account for the perceived risks that inhibit the roll out of new low carbon technology this article through a novel approach uses a grounded theoretical framework to reframe traditional risk literature and provides a connection to governance literature in order to assess the ability of eu governance mechanisms to reduce carbon emissions the empirical research is based on responses from european energy stakeholders who participated in a delphi method discussion and in semi structured interviews these identified three essential requirements for carbon emissions to be reduced to near zero by 2050 1 an integrated european energy network 2 carbon pricing and 3 demand reduction these features correspond to institutionalized responses by the eu and ms the agency for the cooperation of energy regulators acer european union emission trading scheme eu ets and energy efficiency directives and policies integrated into existing ms institutions the theoretical and empirical findings suggest that governance by facilitation energy efficiency fails to induce significant investment and new policy approaches and cannot be relied on to achieve requisite reductions in demand governance by negotiation acer and governance by hierarchy eu ets do reduce risks and may encourage the necessary technological uptake the term risk governance is used to explain the important role governance plays in reducing risks and advancing new technology and thereby lowering carbon emissions in the energy sector

the international monetary system an analysis of alternative regimes abstract this is an exercise in the positive economics of alternative monetary regimes the behavior of output and prices is compared using a stochastic specification which allows asymptotic variances to be obtained without difficulty free floating of exchange rates together with national money supply targets is analyzed first with and without the presence of fads in the exchange rate two alternatives for monetary coordination are then considered first is mckinnon s proposal to fix nominal exchange rates and stabilize aggregate monetary growth or average inflation second is williamson s system of target zones for stable real exchange rates complemented by nominal income targets for fiscal policy

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

when credit bites back using data on 14 advanced countries between 1870 and 2008 we document two key facts of the modern business cycle relative to typical recessions financial crisis recessions are costlier and more credit intensive expansions tend to be followed by deeper recessions in financial crises or otherwise and slower recoveries we use local projection methods to condition on a broad set of macro economic controls to study how past credit accumulation impacts key macro economic variables such as output investment lending interest rates and inflation the facts that we uncover lend support to the idea that financial factors play an important role in the modern business cycle

the great mortgaging housing finance crises and business cycles this paper unveils a new resource for macroeconomic research a long run dataset covering disaggregated bank credit for 17 advanced economies since 1870 the new data show that the share of mortgages on banks balance sheets doubled in the course of the twentieth century driven by a sharp rise of mortgage lending to households household debt to asset ratios have risen substantially in many countries financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries housing finance has come to play a central role in the modern macroeconomy

time consistent collection of optimal seigniorage a unifying framework this paper reviews the existing literature on the time consistency problem of seigniorage collection when monetary policy is determined by optimal taxation considerations it develops a unifying accounting framework and suggests a general measure for seigniorage which encompasses the standard measures employed in the literature in addition the ex ante optimal solution to the optimal taxation problem is derived and interpreted in relation to the ramsey principle we show that the different recommendations of the public finance literature i e the friedman rule of optimal deflation moderately positive inflation and seigniorage maximizing inflation are specific solutions to the optimal taxation problem the paper continues with a formal illustration of the time consistency problem of the ex ante optimal policy and the characterization of the time consistent solution under discretion as possible solutions to the time consistency problem we consider reputational forces institutional reforms that establish central bank independence and specific ways of asset and debt management in particular it is formally shown that a modified version of the asset and debt management scheme suggested by persson persson and svensson is not only necessary but also sufficient for optimality although this did not hold in their model

capital controls and balance of payments crises abstract the theory of balance of payments crises shows that under perfect foresight a system of fixed exchange rate is not sustainable in the presence of diverging economic policies in this paper it is shown how and why capital controls succeed in maintaining the principle of a fixed but adjustable parity both cases of a devaluation and a revaluation are considered and a condition for a parity change to be credible is presented

policy bargains and the problem of model selection abstract parameter uncertainty and disagreements about model specification pose a particular difficulty for economic policy design frankel and rockett argue that if model uncertainty is not explicitly taken into account policy coordination is as likely to decrease welfare as increase it this paper therefore looks at the scope for reducing errors by making strategic model choices part of the overall policy selection procedure it shows that alternative definitions of the policy bargain produces decisions which are robust against disagreements about the correct model while alternative choices of model produce policies which are robust against model uncertainty hence fixed i e model free policy rules are no substitute for making strategic model choices

understanding carbon lock in abstract this paper narrative argues that industrial economies have been locked into fossil fuel based energy systems through a process of technological and institutional co evolution driven by path dependent increasing returns to scale it is asserted that this condition termed carbon lock in creates persistent market and policy failures that can inhibit the diffusion of carbon saving technologies despite their apparent environmental and economic advantages the notion of a techno institutional complex is introduced to capture the idea that lock in occurs through combined interactions among technological systems and governing institutions while carbon lock in provides a conceptual basis for understanding macro level barriers to the diffusion of carbon saving technologies it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration the question of escaping carbon lock in is left for a future paper

delegation in a general equilibrium model of customs unions abstract a difference in the objectives of members of a customs union may be a unifying rather than a divisive force if countries outside the union behave strategically one union member may want to delegate to its partner the ability to set the common external tariff we demonstrate these results in the context of a pure exchange general equilibrium trade model we show that if tariffs are strategic substitutes the union country which is relatively less well endowed in the exported good may be willing to delegate to its partner which behaves more aggressively in setting the union s policy the delegation decision is reversed if tariffs are strategic complements the model extends the standard results on the appropriate level of the union policy by adding another dimension that of the optimal decision making agent

institutions household credit composition and the business cycle we show that the negative effect of household credit growth on subsequent economic growth documented in the recent literature is not the same across countries the effect is stronger in countries with weak institutions where the fraction of consumer credit in total household credit is greater that is an important nuance as consumer credit is a sizable part of household credit in many emerging markets and its rapid buildup should be observed with the same caution as a rapid buildup in housing credit jel g21 e32 e44

seigniorage and the case for national money in countries with high rates of inflation there is typically movement away from the use of the local currency the paper analyzes the costs and benefits of using a local currency with emphasis on the seigniorage foregone by using a foreign money even if it should be desirable for a country to fix its exchange rate it still loses seigniorage if it does not use its own money the case for using a foreign money then turns largely on the superior discipline imposed on domestic policymakers by removing their control over the money supply alternative methods of imposing discipline are discussed estimates of the amount of seigniorage raised by different governments are presented seigniorage amounts in some cases to about 10 percent of government revenue estimates are also presented of both the annual flow and one time stock costs of giving up use of domestic currencies and instead using the dollar the flow cost is typically about 1 percent of gnp and the stock cost is around 10 percent of gnp

expanding opportunities strategic buying of utilities in new eu member states during the 1990s limited investment opportunities in western europe the opening of the energy markets in eastern europe and the future expansion of the european union eu prompted an expansionist strategy by energy companies from the original eu member states in this paper the acquisition and divestiture activities and strategies of utilities from france and germany are analyzed in the context of the 2004 and 2007 eu enlargements through quantitative and qualitative data analysis including the development of two case studies the strategy for expansion and evolution in new member states is examined the results demonstrate a concerted effort to establish economies of scale through ownership of distribution companies a change in strategy occurs as these privatization opportunities disappear generation and trading activity become the growth area for these companies as electricity supply becomes another factor that can contribute to the economies of scale recent eu supported efforts towards regionalization of electricity markets positions these companies well due to their strong regional presence this paper will explore these issues in the context of ownership and geographic distribution

loss of monetary discretion in a simple dynamic policy game abstract we analyze a simple policy game featuring monetary credibility problems and argue that loss of monetary discretion is not advantageous two elements form the basis of our analysis firstly we endogenize the source of credibility problems and secondly we consider a dynamic framework where credibility problems are not time invariant by doing this we are able to demonstrate that credibility problems are temporary and in steady state the government has removed these through sound policies a binding policy rule will only serve as an obstacle towards this steady state

the limits of independence and the policy of the ecb it is argued that the european central bank s independence is not as secure as it seems and that as a result it has appreciable institutional incentives to protect and enhance its position it follows that its behaviour should not be understood as being solely determined by the pursuit of price stability one consequence is that certain points on which it has been criticised on the basis that its approach makes for ineffective monetary policy might be better understood as often effective attempts to protect its position another is that making a central bank or any other institution completely independent may be much harder than it seems and failed attempts which come close are not necessarily to be preferred even by the advocates of independence to less ambitious designs

fiscal leadership and central bank design this article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives it is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously further it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies jel classification e52 e61 f42

escaping carbon lock in this article explores the climate policy implications of the arguments made in understanding carbon lock in unruh 2000 which posited that industrial countries have become locked into fossil fuel based energy systems through path dependent processes driven by increasing returns to scale carbon lock in arises through technological organizational social and institutional co evolution culminating in what was termed as techno institutional complex tic in order to resolve the climate problem an escape from the lock in condition is required however due to the self referential nature of tic escape conditions are unlikely to be generated internally and it is argued here that exogenous forces are probably required

inflationary finance under discrepion and rules inflationary finance involves first the tax on cash balances from expected inflation and second a capital levy from unexpected inflation from the standpoint of minimizing distortions these capital levies are attractive ex post to the policymaker in a full equilibrium two conditions hold 1 the monetary authority optimizes subject to people s expectations mechanisms and 2 people form expectations rationally given their knowledge of the policymaker s objectives the outcomes under discretionary policy are contrasted with those generated under rules in a purely discretionary regime the monetary authority can make no meaningful commitments about the future behavior of money and prices under an enforced rule it becomes possible to make some guarantees hence the links between monetary actions and inflationary expectations can be internalized there is a distinction between fully contingent rules and rules of simple form a simple rule allows the internalization of some connections between policy act ion and inflationary expectations but discretion permits some desirable flexibility of monetary growth this abstract was borrowed from another version of this item

gold monetization and gold discipline gold and its price have emerged as frequent topics of both academic and government debate 2 public attention focused on the gold market since gold s price began fluctuating violently in 1980 and 1981 has turned to gold as a possible means of removing some discretion inherent in the current fiat money system since lack of adherence to monetary rules can lead to problems of dynamic policy inconsistency academic economists have begun seriously to reconsider monetary standards based either on gold or on some other commodity as politically feasible methods of establishing rules 3

the advantage of tying one s hands ems discipline and central bank credibility abstract it is often argued that the ems is an effective disciplinary device for inflation prone countries in europe since it forces the respective policy makers to pursue more restrictive monetary policies than they would otherwise it is not clear however why these countries should submit themselves to such discipline this paper argues that to answer this question appropriately one must consider that ems membership brings potentially large credibility gains policy makers in inflation prone countries the reason is that not only it attaches an extra penalty to inflation in terms of real appreciation but makes the public aware that the policy maker is faced with such penalty and thus helps to overcome the inefficiency stemming from the public s mistrust of the authorities

target zones and international policy coordination the contrast between the necessary and sufficient conditions for success abstract this paper distinguishes between the necessary and sufficient conditions for adopting exchange rate target zones for improving macroeconomic performance the necessary conditions are easily satisfied but it is much more difficult to design a targetting system which satisfies the sufficient conditions when the exchange rate is an intermediate target on that criterion the gains may be smaller than previously estimated however target zones have important practical advantage they are effective in promoting stability and as a simple but uncontroversial way of securing the coordination necessary to prevent policy makers adopting inefficient or competitive policies

getting round the lock in in electricity generating systems the example of the gas turbine abstract the purpose of this paper is to show how in a situation of lock in in the environment of electricity generation a new technology can succeed in overcoming this situation and become competitive our study will show that it is possible to get round the lock in by bringing into play the increasing returns of adoption in particular production niches where the existence of powerful constraints of techno economic consistency leads to a path of increasing specification then a hybridization of the competing technologies will allow the new technology to emerge from the original niche and take advantage of the increasing returns of adoption which were hitherto the reserve of the former technology we shall then draw lessons from the example of the gas turbine in comparison with the basic model of b arthur

transparency reputation and credibility under floating and pegged exchange rates this paper shows that if the cost of importing foreign inflation and real exchange rate shocks are not too high then the equilibrium nominal exchange rate regime for a country with a credibility problem is a peg under which credibility is higher and inflation is lower than under a float this holds true although devaluations of the pegged rate are assumed to be costless the reason is that as realized inflation is not perfectly controllable planned inflation under a float is private information in contrast since the exchange rate can be perfectly controlled pegging resolves the private information problem is more transparent and makes reputation more effective

international policy design and the sustainability of policy bargains events of the past decade and the persistence of the worldwide recession have underlined the interdependence of the major economics competitive devaluations first illustrated the dangers of unilateral decisions and politicians have regularly called for concerted policies since the bonn economic summit in 1978 economic theory has shown that coordinated policies can bring gains but the question of whether those gains will be significant and how they will be distributed remains unanswered remarkably few empirical results on how interdependence should affect policy design or even on the signs of spillovers between economies have been produced this paper estimates the costs of uncoordinated policies to the us and eec economies and also the potential gains and risks in cooperation it focuses particularly on the process of determining rational policy bargains and whether in an international context such bargains are likely to be sustainable

on the imperfect substitutability of policy regimes exchange rate targetting vs policy coordination abstract exchange rate targetting is always an imperfect substitute for explicit policy coordination but succeeds when economies are either structurally dissimilar with symmetric shocks or structurally symmetric with dissimilar shocks a joint commitment then generates economies of scale in interventions

allocating greenhouse gas emissions in the german federal system regional interests and federal climate governance abstract the academic debate on climate policies often portrays germany as one of the most successful cases despite its federal system of joint decision making most studies of german climate policy focus primarily upon activities at the national level while disregarding the heterogeneous economic interests and veto options of the lander using the cases on renewable energy policy and emission trading we analyze the subnational interests and institutional mechanisms that shape the intergovernmental negotiations and policy outcomes within the federated system the cases confirm assumptions made by general research on german federalism according to which strategies for the externalization and compensation of costs are of particular importance for redistributive policies and the eu plays a major role in dissolving potential barriers to the process of federal policy formation contrary to the reservations often expressed we demonstrate that climate policies have led to an increased economic and political competition between the lander and have supported effective solutions however recent shortfalls in the effectiveness of emission trading and in the cost efficiency of renewable energy policies indicate that redistributive conflicts in the allocation of greenhouse gas emissions have to be addressed more systematically within the german and the european system s of joint decision making

fiscal rules and government borrowing costs international evidence we find that the adoption of numerical fiscal rules reduces government borrowing costs in a sample of 101 advanced and developing countries for 1985 2010 we apply a variety of propensity score matching methods to address the self selection problem of policy adoption and find strong evidence that fiscal rules have large and significant treatment effects on lowering government borrowing costs in both international and domestic financial markets the results are robust to changes in country sample and alternative estimation methodology and are consistent with fiscal rules helping to build policy credibility by reducing the probability of default and the risk premium on government debt that compensates lenders for this possibility jel e43 g12 h60

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

fewer monies better monies in the aftermath of emerging market crises from russia to asia and latin america there is a quest for better monetary arrangements that are more crisis proof fixed rates are out flexible rates are in with a policy focus on inflation targeting but there is of course the alternative of abolishing exchange rates all together this paper revisits the issue of dollarization or currency boards to review what arguments in the debate stand up the case for flexible exchange rates emphasizes the need for a tool to accomplish relative price adjustment this paper argues that in an intertemporal perspective most shocks require financing in the capital market rather than adjustment moreover countries frequently do not use their flexible rate to play a cyclical role and as a result only a pay a premium for the option to depreciate but do not take advantage of the flexibility on the contrary they engineer systematic overvaluation in the context of inflation targeting

financial development convergence abstract we show that credit levels relative to gdp and other measures for financial development tend to converge across countries over time the results are obtained using a broad sample of countries over many years and controlling for the quality of country level institutions the efficiency of financial institutions and a range of macroeconomic variables while we find evidence for convergence in the broad sample we show that it levels off when countries reach a medium level of financial development at high levels of financial development convergence slows down even more and becomes negligible