capacity constraints and cycles in property casualty insurance markets underwriting cycles are unexpected in a structurally competitive industry where financial capital is the major determinant of output capacity arbitrage theories explain underwriting cycles as largely an artifact of institutional lags and reporting practices capacity constraint theories view insurance markets as characterized by real frictions that cause underwriting cycles by temporarily reducing the industry s capacity to insure risks arbitrage theories imply nofsystematic relationship between capacity and underwriting margins while capacity constraint hypotheses predict a negative relationship this article provides a test of the two theories by examining the empirical relationship between casacity and underwriting margins the results using data on four insurance lines generally support the capacity constraint hypothesis unanticipated decreases in capacity cause higher profitability and prices

alternative forms of deposit insurance pricing and bank incentive issues abstract this paper derives formulas for a deposit insuring agency s liability and hence a fair value deposit insurance premium and the equilibrium value of bank equity considering a wide variety of factors affecting individual bank risk both fixed rate and variable rate risk sensitive insurance systems are analyzed consideration is made as to whether the deposit insuring agency makes direct payments to depositors or arranges mergers following bank closings the effect of these various policy choices on banks incentive for risk taking is also analyzed

electricity outages in ghana are contingent valuation estimates valid african countries experience persistent and serious energy outages but while multiple valuation studies provide estimates of the costs of electricity outages in high income countries evidence is scarce for lower and middle income countries the few studies that assess the value of reliable energy supply rely on the contingent valuation method that is under wide scrutiny this paper aims to provide new estimates of households willingness to pay to reduce electricity outages for ghana and contributes to the debate on the validity of contingent valuation results for energy reliability our results suggest that households are willing to pay ghs 67 17 per month for reliable electricity supply equivalent to 7 of respondents income the results of tests for hypothetical bias wtp wta disparity and income effects suggest that the contingent valuation estimates from this study are robust and can support decision makers in prioritizing energy policies and investments

pricing risk adjusted deposit insurance an option based model this paper presents a methodology for arriving at empirical estimates of deposit insurance premiums from market data by using isomorphic relationships betweeen equity and a call option and insurance and a put option the data utilizes the market value of equity to solve for the asset value and its volatility market perceptions of fdic bailout policies are explicitly modeled so as to eliminate the bias in inverted values of assets and their volatility sensitivity analyses are performed to show that rank orderings based on premiums are robust to changes in specification thus facilitating allocation of aggregate premium across banks while economists have long argued in favor of risk adjusted deposit insurance as both more equitable and more efficient than the current system of flatrate premiums various recent developments have further contributed to an increasing dissatisfaction with the current system first both the banking industry and the government seem to be tending to the view that deregulation of the banking industry would be necessary in order to meet more sophisticated future demands on the industry as well as desirable as a policy means of stimulating greater competition among banks moreover a sudden rise in the incidence of bank failures 1 and the vulnerability of the u s banks to the socalled international debt crisis have served to bring to the fore concern about the health of the banking industry in the absence of deposit insurance riskier banks will be able to attract deposits only at higher rates and these higher costs of funding serve as built in market regulated incentives to limit excessive risk taking by banks as introduction of deposit insurance makes deposits equally risk free across banks these incentives disappear and regulation and close supervision of the banking industry must necessarily replace them as deterrents to excessive risk taking thus when insurance is offered at a flat premium regulation is designed to ensure that the risk posed to the insurer both asset and financial risk is appropriately uniform

energy efficiency and sustainable growth in industrial sectors in european union countries a nonlinear ardl approach abstract it can be said that economic growth providing it ensures a clean and safe environment is one of the main objectives of many countries with this in mind an important question needs to be asked what is the relationship between energy efficiency and economic growth this can only be answered through an empirical analysis by carrying out such an analysis using the energy efficiency of the industrial sector for 11 european union countries for a time span from 1997 to 2015 it should be possible to understand if the energy efficiency measures and investments being made are driving economies towards greater energy efficiency and sustainable growth this paper uses a nonlinear ardl model which allows short and long run relationships to be analysed for the ascending and descending movements of variables the results indicate that investment is increasing energy efficiency while at the same time reducing greenhouse gas emissions economic growth is driving economies to greater energy efficiency the same result is found in the industrial energy price index to verify robustness the environmental kuznets curve was estimated using gross domestic product per capita and as an alternative the industrial production index to ensure increased energy efficiency along with sustainable growth policymakers must adapt their policies and devise new ones to both incentivise investment and control energy pricing alternative ways of electricity generation such as renewable sources could allow the economy to grow in a more sustainable way such mechanisms would let policymakers develop policies for greener and more sustainable growth while at the same time encouraging the efficient use of energy

optimal reinsurance and asset allocation under regime switching abstract we investigate optimal reinsurance and asset allocation strategies for an insurer who is concerned about changes in economic conditions numerical examples with carefully estimated parameters show that optimal reinsurance and asset allocation strategies for an insurer could be non myopic meaning that they could be affected by future market conditions and change drastically according to current economic conditions however an insurer with poor financial prudence might be myopic so that the optimal strategies are similar to those of the single regime model we also show that drastic changes of the correlation between stock prices and insurance claims investment opportunity and loading factors might significantly affect optimal reinsurance strategy asset allocation strategy or both of insurance companies

deposit insurance reform what are the issues and what needs to be fixed abstract the current problems in the commercial banking industry have led to widespread calls for reform of the deposit insurance contract on the grounds that it promotes moral hazard we review the empirical evidence for the significance of moral hazard as an important cause of the present crisis we then evaluate various reform proposals grouped into two broad classes proposals that seek to impose greater discipline on bank stockholders and proposals to increase the disciplinary role of bank debtholders finally we identify some issues that have received inadequate attention in the literature on bank regulation

the liability insurance market t his paper offers an overview of the u s liability insurance market and the link between its performance and developments in tort law over the last few decades the dominant feature of the insurance market has been the intermittent periods of rapidly rising premiums and cutbacks on the availability of coverage the insurance cycle appears to be increasing in amplitude and since the 1960s has been concentrated increasingly in liability lines an episode of rising premiums in the late 1960s was followed by a six year period of declining and eventually negative growth rates in total liability insurance premiums over the 1975 1977 period the annual growth rate jumped to 30 percent then followed another period of declining real premiums until premiums nearly tripled in 1984 1986 accompanied by cancellations of policies and massive withdrawal of insurers from some lines this crisis had an economic impact beyond the insurance market leading to the withdrawal of many goods and services from u s markets in mid 1987 the market began to turn again with premiums falling by as much as 40 percent for some commercial policies since then aggregate revenue from premiums has been relatively stable the liability insurance market is intertwined with the tort system in addition to providing incentives to avoid accidents the tort system allocates the risks of accident costs in providing compensation for accident victims the modern expansion of liability in tort law as described by priest in this issue represents a shift in the burden of supplying insurance from first party insurance markets to liability or third party insurance markets clearly this shift will

a new technique for postsample model selection and validation abstract the model selection and granger causality literatures have focused on insample rather than postsample hypothesis testing this is because postsample model validation periods are usually short whereas the correlations in typical postsample forecast errors require large sample methods a resampling based postsample inference procedure is described which explicitly estimates the uncertainty which its large sample approximation induces in the inference significance levels it produces the procedure is applied to postsample forecasting errors from the ashley et al 1980 study examining granger causation between us consumption and advertising expenditures postsample model validation is apparently feasible but requires longer postsample periods than past studies have allocated

the energy efficiency situation in ghana abstract ghana s electricity sector has long been saddled with challenges regarding supply security and power quality the existing power plants are not able to attain full generation capacity due to fuel supply constraints as well as the uncertainty of rainfall and water inflows into the hydroelectric power plants there has been an imbalance between demand and supply in the country with a shortage of 25 of peak power reported in year 2014 2015 in dealing with the energy crises the focus of the country s energy sector has been on the installation of additional thermal power plants however capacity additions face a number of obstacles such as the requirement for high capital investments timely approvals to build new power plants and there has been increasing inflation problem therefore securing adequate supplies to meet rapidly growing demand remains a challenge at least in the short term coupled with this is the country s electrical appliance market which has been flooded with imports of used low efficiency appliances from overseas as the country achieves middle income status the number of households that can afford major household appliances is expected to increase with the prospect of many consumers buying inefficient appliances thereby unnecessarily burdening the national grid while energy efficiency ee is internationally recognised as a low cost readily available resource that could help improve electricity supply security its implementation in ghana has only recently been given serious attention this paper provides a review of energy efficiency initiatives undertaken by the regulating agencies responsible for energy issues it provides a comprehensive overview of the current energy efficiency status of three household appliances namely refrigerators air conditioners and lighting systems the review indicates that ee measures carried out especially in the replacement of incandescent lamp with compact fluorescent light cfl made significant savings that offset the national electricity peak demand by 200 240 mw

capacity constraints and the dynamics of underwriting profits paul d thistle the presence of an underwriting profit cycle in property liability insurance has become a stylized fact models of this underwriting cycle imply that the insurance market is governed by two regimes as capacity is constrained or not we apply the smooth transition regression model to insurance industry data for 1934 1993 to test for a regime shift we find a rapid shift between two distinct regimes with different dynamics when capacity is not restricted we find no evidence of a cycle the cycle is present in periods when capacity is restricted immediately following world war ii and after 1968 the underwriting cycle appears to be a recent phenomenon jel g22 c32 i introduction it is well known that the property liability insurance industry is subject to cycles in premiums and underwriting profits the main features of the underwriting cycle are also well known in a soft market coverage is readily available while premium revenue and underwriting profits are low in a hard market coverage becomes difficult to obtain while premium revenue and profits increase the onset of a hard market is typically quite rapid and is followed by the erosion of premium revenue and profits as market conditions return to a soft market 1 it is also generally accepted that the cycle has a period of approximately six years although there is some variation across lines and among countries this approximate period for the underwriting cycle is based on time series estimates of second order autoregressive models e g venezian 1985 and cummins and outreville 1987 understanding the causes of the property liability underwriting cycle is important for public policy and insurance regulation sof t markets may contribute to insurer insolvencies if firms price and underwrite too aggressively while high prices and restrictive underwriting in hard markets may disrupt the flow of goods and services a number of alternative theories have been proposed to account for the cycles in premiums and profits in the property liability insurance market initially attention focused on aspects of the process for determining insurance rates e g harrington and danzon 1991 1994 simmons and cross 1988 stewart 1981 venezian 1985 and wilson 1981 more recent research has developed equilibrium models of the underwriting cycle financial pricing models based on discounted cash flows imply that insurance prices are equal to policy expenses plus the expected present value of future claims under the policies issued 2 financial pricing models implicitly or explicitly assume perfect capital markets in the absence of capital market imperfections there should be no cycles and prices and profits should vary inversely with interest rates cummins and outreville 1987 and doherty and kang 1988 argue that if insurers have rational expectations then as a result of insurance accounting practices and inst itutional features of insurance markets underwriting profits follow an autoregressive data generating process which gives the appearance of a cycle the capacity constraint hypothesis developed by cummins and danzon 1991 gron 1994a b and winter 1988 1991a b 1994 is based on the fact that an insurer must have sufficient policyholders surplus capacity to support the policies it writes 3 capital market imperfections lead firms to rely on internal capital as the source of underwriting capacity this in turn implies that hard markets must be temporary and that soft markets will persist the capacity constraint hypothesis implies that premiums and profits will depend on interest rates and are negatively correlated with surplus or capacity in the short run in the long run capital enters the industry until the constraint is not binding so profits and surplus are not correlated in the long run cagle and harrington 1995 and cummins and danzon 1997 add the assumption that policyholders are willing to pay more for policies with higher financial quality lower insurer default risk and that insurer default risk is endogenous

evidence of capacity constraints in insurance markets this article provides empirical support for the primary predictions of capacity constraint theories of property casualty insurance cycles the primary implications concern industry capacity and the difference between the price of insurance and noncapital costs referred to here as the price payment margin ppm capacity constraint theories predict that low capacity will lead to higher ppms and that capacity growth will follow ppm increases as insurers rebuild capacity price payment margin and capacity series are constructed using industry time series for 1949 90 the estimation finds that ppm growth varies inversely with capacity at the beginning of the period and also inversely with changes in capacity in addition declines in capacity are associated with ppm growth next period while increases in capacity generally have no significant effect on next period s ppm growth furthermore current capacity growth is positively correlated with last period s ppm growth

analysis of energy end use efficiency policy in spain abstract the implementation of saving measures and energy efficiency entails the need to evaluate achievements in terms of energy saving and spending this paper aims at analysing the effectiveness and economic efficiency of energy saving measures implemented in the energy savings and efficiency action plan 2008 2012 eap4 in spain for 2010 the lack of assessment related to energy savings achieved and public spending allocated by the eap4 justifies the need of this analysis the results show that the transport and building sectors seem to be the most important from the energy efficiency perspective although they did not reach the direct energy savings that were expected there is scope for reduction with the appropriate energy measures for the effectiveness indicator the best performance are achieved by public service agricultural and fisheries and building sectors while in terms of energy efficiency per monetary unit the best results are achieved by transport industry and agriculture sectors authors conclude that it is necessary that central regional and local administrations will get involved in order to get better estimates of the energy savings achieved and thus to affect the design of future energy efficiency measures at the lowest possible cost to the citizens

the time varying correlation between uncertainty output and inflation evidence from a dcc garch model abstract using a new uncertainty index from baker et al 2012 we evaluate the time varying correlation between macroeconomic uncertainty inflation and output estimation results from a multivariate dcc garch model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s whereas the correlation between uncertainty and output is consistently negative

insurance cycles interest rates and the capacity constraint model insurance profits exhibit cyclical behavior that has been attributed to capital market constraints the authors show that changes in interest rates simultaneously affect the insurer s capital structure and the equilibrium underwriting profit depending upon asset and liability maturity structure capital market access and reinsurance availability insurers will be differently affected by changing interest rates the authors find that the average market response to changing interest rates roughly tracks market clearing prices these cyclical effects are enhanced for firms with mismatched assets and liabilities and more costly access to new capital and reinsurance this evidence supports the capacity constraint hypothesis copyright 1995 by university of chicago press

considerations of cost trade offs in insurance solvency surveillance policy abstract we propose a process for identifying potentially insolvent insurers on a cost effective basis a loss cost function is developed such that the effectiveness of monitoring is maximized relative to a cost constraint the loss cost function is supported by a model that provides a rank ordering of financial institutions according to their probability of insolvency when tested against a full sample of property liability insurance companies the procedure provides information critical to maximizing the effectiveness of regulatory resources available for solvency surveillance and performs well as a predictor of insolvency likewise the rank ordering of insurers overcomes an estimation problem critical to establishing risk adjusted guaranty assessments

capital regulation and deposit insurance abstract a model of deposit insurance in which the bank closure rule can systematically deviate from the economic insolvency condition used in earlier models is developed simulation of that model for plausible parameter values suggests that the failure to close banks on a timely basis has a profound effect in increasing the insurer s liability the implications of these results for capital regulation are discussed

the impact of the volatility of monetary policy shocks this paper studies the impact of the volatility of monetary policy using a structural vector auroregression svar model enriched along two dimensions first it allows for time varying variance of monetary policy shocks via a stochastic volatility specification second it allows a dynamic interaction between the level of the endogenous variables in the var and the time varying volatility the analysis establishes that the nominal interest rate output growth and inflation fall in reaction to an increase in the volatility of monetary policy the analysis also develops a dynamic stochastic general equilibrium model enriched with stochastic volatility to monetary policy that generates similar responses and provides a theoretical underpinning of these findings

improving electricity supply security in ghana the potential of renewable energy for decades ghana s economy has been fuelled by abundant inexpensive hydropower as a developing economy ghana s electricity demand has long been relatively low though rising in recent times due to increasing economic growth urbanization and industrial activities however the rapid demand growth as well as periodic hydrological shocks leaves the country increasingly reliant on expensive oil and gas based generation power plants with a resultant drain on the national economy the main electricity generation company the volta river authority is not able to generate enough electricity for all the demand sectors the electricity supply demand margins the difference between peak demand and available supply of the country fall short of the recommended engineering practice and thus presents a high supply security risk the country has been experiencing an increase in the frequency of power cuts over the last ten years it is clear that ghana will have to expand and diversify its generation capacity in order to improve supply security this paper provides a review of the assessed potential renewable energy resources their current exploitation status and their potential contribution to the electricity supply of the country the paper also presents the barriers to their utilization and the existing policy and regulatory instruments to overcome those barriers plus the current and expected future impacts of these instruments the results show that ghana has several res such as wind solar pv mini hydro and modern biomass that can be exploited for electricity production while their exploitation for electricity generation is currently very low providing just 0 13 of the country s generation the review shows a great potential for res generation to increase substantially over the next decade looking at the government commitment and legal frameworks that are being put in place

crises in medical malpractice insurance evidence of excessive price cutting in the preceding soft market abstract prior work suggests that heterogeneous information or weak incentives for solvency could have caused some general liability insurers to charge low ex ante prices during the early 1980s and mid to late 1990s putting downward pressure on other firms prices and plausibly aggravating subsequent periods of rapid premium growth we analyse whether the 1994 1999 soft market in medical malpractice insurance led some firms to underprice grow rapidly and subsequently experience upward revisions in loss forecasts loss development which could have aggravated subsequent market crises consistent with the underpricing hypothesis the results indicate a positive relation between loss development and premium growth among growing firms underpricing was likely more prevalent among non specialist malpractice insurers

long memory economic policy uncertainty and forecasting us inflation a bayesian varfima approach abstractwe compare inflation forecasts of a vector autoregressive fractionally integrated moving average varfima model against standard forecasting models u s inflation forecasts improve when controlling for persistence and economic policy uncertainty epu importantly the varfima model comprising of inflation and epu outperforms commonly used inflation forecast models

price cutting in liability insurance markets this article analyzes alleged underpricing of general liability insurance prior to the mid 1980s liability insurance crisis the theoretical analysis considers whether moral hazard and or heterogeneous information for forecasting claim costs can cause some firms to price too low and depress other firms prices cross sectional analysis of insurer loss forecast revisions which should be greater for firms with low prices caused by moral hazard or heterogeneous information and premium growth provides evidence consistent with low pricing due to moral hazard but not heterogeneous information the evidence also implies that shifts in the loss distribution produced large industrywide forecast errors copyright 1994 by university of chicago press

the property liability insurance cycle a comparison of alternative models the objective of this paper is to compare alternative models of insurance pricing as theories of the property liability underwriting cycle the existing literature has focused on comparing two models the financial pricing and capacity constraint models however these are not the only relevant models we show that six alternative models imply the same general form of the pricing equation we apply the model to data on stock property liability insurers for the period 1935 1997 we find that the actuarial model and the capacity constraint hypothesis are the only theoretical models that are consistent with the data

broker monitoring of premium adequacy the role of contingent commissions contingent commissions which are payments made by an insurer to brokers based on the volume and profitability of insurance placed with the insurer have been criticized as damaging to the relationship between the insured and its broker the argument is made that contingent commission payments encourage brokers to select insurers for their clients based on the potential to earn contingent commissions rather than on the needs of the insured we argue that contingent commission payments which while directly paid by the insurer are ultimately paid by the insured through higher premiums are beneficial to insureds because they provide an incentive for the broker to place their coverage with an insurer that is charging an adequate premium we contend that although inadequate premiums are perhaps good for the insured in the short term in the longer term inadequate premiums will result in price hikes or coverage restrictions that are harmful to the insureds our empirical analysis demonstrates that insurers

economic policy uncertainty in the us does it matter for the euro area abstract we investigate the effects of a us economic policy uncertainty shock on some euro area macroeconomic aggregates via structural vars we model the indicators of economic policy uncertainty recently developed by baker et al 2013 jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas according to our svars a one standard deviation shock to us economic policy uncertainty leads to a statistically significant fall in the european industrial production and prices of 0 12 and 0 06 respectively the contribution of the us uncertainty shock on the european aggregates is shown to be quantitatively larger than the one exerted by an euro area specific uncertainty shock

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

techno economic and environmental analysis of power generation expansion plan of ghana this paper examines the current electrical generation expansion plan of ghana and compares it with proposed expansion pathways with higher penetration of renewable energy technologies an adaptation of schwartz s scenario methodology was used to develop the scenarios which were then analysed using the long range alternatives planning leap model each of the scenarios represents policy options for generation expansion in ghana up to 2040 energy economic and environmental analysis of the three alternative scenarios compared to the base scenarios was undertaken sensitivity results show that if the country were to follow the generation expansion path described in the renewable energy scenarios it could reap economic benefits of 0 5 13 23 depending on the developments in fuel prices and renewable technology capital cost the analysis further quantifies benefits to be derived from a reduction in greenhouse gases of the scenarios policy implications for the generation system of ghana based on the results are also discussed

solvency regulation and the property liability insurance cycle i introduction the supply of property liability insurance in the u s appears to be extraordinarily cyclical liability insurance lines in particular fluctuate between soft markets of stable premiums and low returns to insurers and tight markets or insurance crises of rising premiums cut backs on availability and tight limits on coverage the soft markets of the early 1970s and early 1980s were followed in 1975 and late 1984 by sudden premium increases of hundreds of percent for some policies 1 in mid 1987 early july according to some reports the market began to turn around again premiums fell by as much as 40 percent and coverage limits increased up to 500 percent compared to the previous year 2 in a previous paper winter 1988 i addressed the puzzle of why some lines of insurance are apparently so vulnerable to fluctuations when conventional economic theory predicts that premiums will change only one for one with the present value of expected claims this paper examines a specific allegation raised during the most recent insurance crisis that existing regulation of property liability insurance exacerbates market fluctuations the principal enforcement role of state insurance commissions is to monitor the financial condition of insurers commissioners ensure that financial solvency standards are met so that policyholders are protected from the consequences of bankruptcy more precisely the regulations protect state guarantee funds which assume the liabilities of bankrupt insurers the regulators examine a number of financial ratios but the dominant measure of financial leverage is the ratio of the current volume of business to net worth or surplus insurers are restricted by state commissioners from writing more insurance than considered justified by their current net worth in order that realized policy claims can be met even if they turn out to be substantially higher than revenues would cover in determining the ratio of quantity of insurance to net worth regulators face an aggregation problem a sensible measure of the total quantity of insurance sold by a firm does not exist the total number of policies sold for example is meaningless insurance commissioners therefore use premium revenues as a measure of the volume of business historically insurers were allowed a value of two for the ratio of premiums to net worth before attracting the scrutiny of insurance commissioners according to a standard text on insurance published in 1982 for more than 40 years insurance commissioners have used the 2 1 rule as an indicator of the maximum safe premium volume that property and liability insurers might write the rule is that the premium volume should not exceed two times policyholder surplus that is net worth huebner et al 1982 the 2 1 rule was referred to as the kenney rule after the commissioner who first proposed it the standard for a safe premium to net worth ratio has changed over time insurers in most states are now considered to meet solvency requirements when the ratio of premiums to net worth does not exceed three or four as a measure of financial leverage in solvency regulation the premiums to net worth ratio has perverse effects suppose that demand is inelastic and that a supply shock to the market leads to an increase in premiums and hence revenue because the ratio of premiums to net worth has increased regulatory pressures on insurers to maintain safe solvency standards will lead to even tighter supply this regulatory pressure will lead to a further increase in premiums and revenue instead of signalling a more conservative leverage position the ratio of premiums to net worth increases leading to a more negative assessment by the regulator of the insurers financial viability and hence to further pressure to raise premiums

renewable energy electricity development in ghana observations concerns substitution possibilities and implications for the economy abstract can ghana build its economy on renewable energy is it possible to substitute nonrenewable for renewable energy what is the impact of renewable energy on the economy of ghana these questions are relevant and worth considering as far as the renewable energy development agenda in ghana is concern using the translog production function approach this study primarily investigates whether ghana can move away from nonrenewable electricity generation to renewable power generation in particular we provide estimates for the relationship between the two energy types and output the estimates are then used to calculate the output and substitution elasticities between renewable and nonrenewable energy our findings show that while the impact of nonrenewable energy on ghana s economy is negative that of renewable energy is insignificant with output elasticities for both energy types averaging 0 139 and 1 875 respectively even though substitution elasticity suggests the possibility of moving towards a renewable power generation system this study also highlights the limitations associated with such transition citing inherent problems such as scale cost and location based on the analysis done in the context of the findings this study recommends a policy that supports an optimal energy matrix with both renewable and nonrenewable sources

optimal bank reorganization policies and the pricing of federal deposit insurance optimal dynamic regulatory policies for closing ailing banks and for deposit insurance premia are derived as functions of the rate of flow of bank deposits and interest rate on deposits the economy s risk free interest rate and the regulators bank audit administration costs under competitive conditions the threshold assets to deposits ratio below which a bank should be optimally closed is shown to be greater than or equal to one optimal deposit insurance premia and probabilities of bank closure are shown to be nondecreasing in the bank s risk on investment and nonincreasing in the bank s current assets to deposits ratio should regulatory agencies close reorganize an ailing federally insured financial institution if so when the recent record rate of failures of savings and loans associations s ls has renewed the urgency of this question the regulatory agencies are empowered but not required to reorganize financial institutions that are statutorily insolvent i e have zero or negative regulatory net worth recently regulators have in many instances permitted insolvent financial institutions to remain in operation 2 also while debating on the increase of the proposed funding of the federal deposit insurers the u s congress argued whether it would be desirable and if so when to close more s ls thus when regulators should close a troubled financial institution has become a major question of bank regulatory policy while the existing academic literature provides powerful insights into the structure and pricing of the insurers liability this literature offers very little guidance regarding the timing of bank reorganizations 3 indeed to the best of our knowledge the value of the federal

stock versus mutual ownership structures the risk implications this article provides empirical tests of the risk differences between two types of ownership structure in the property liability insurance industry empirical evidence is provided that suggests stock insurers have more risk than mutuals where the risk inherent in future cash flows is proxied by the variance of the loss ratio further evidence suggests that stock insurers write relatively more business than do mutuals in lines and states having higher risk copyright 1993 by university of chicago press

interest rates and insurance price cycles abstract property liability insurance prices and profits appear to move in a six year cycle the common explanation for the cycle amongst many industry analysts is that the insurance market is inherently unstable and that prices fail to converge on clearing levels our explanation is different we identify spot equilibrium prices using the capital asset pricing model but informational regulatory and contractual lags preclude instantaneous adjustment we therefore model the temporal movement of prices using a partial adjustment model in which actors form rational expectations the actual movement of insurance prices does seem to track closely those estimated by the partial adjustment model the cycle may be better viewed as a series of converging responses to changing spot prices

households willingness to pay for reliable electricity services in ghana abstract access to reliable electricity is important in increasing the living standards of households and promoting sustainable development however ghanaian households have had to grapple with frequent power outages and poor quality electricity services in recent times this study examines the factors influencing households willingness to pay for reliable electricity services in ghana using data collected from 950 households in the cape coast metropolitan area and the tobit regression technique it was revealed that monthly income prior notice on power outages business ownership separate meter ownership household size and education significantly affect willingness to pay for reliable electricity services on the average households were prepared to pay 44 percent gh 6 80 us 3 42 more relative to the mean monthly electricity bill in the sample to improve electricity services it is envisaged that the findings would be used by policy makers and utility companies to make electricity generation and distribution more sustainable and efficient

the modern expansion of tort liability its sources its effects and its reform this paper reviews the development of tort law during the 20th century with particular attention to the broad expansion of liability since the 1970s it attempts to explain the origins of the expansion of liability to present examples of its effects on product and service markets and to analyze the extensive efforts of the past five to six years toward liability reform efforts which i conclude have had only a slight relationship to the underlying sources of modern liability problems though the empirical evidence is thin virtually all studies of the effects of specific modern rules demonstrate that modern tort law has substantially dislocated product and service markets as one might expect of an assertive legal regime founded on largely noneconomic principles as we shall see market dislocations especially for insurance have increased sharply during the past decade

forecasting aggregate retail sales the case of south africa abstract forecasting aggregate retail sales may improve portfolio investors ability to predict movements in the stock prices of retail chains this paper uses 26 23 single and 3 combination forecasting models to forecast south africa s aggregate seasonal retail sales we use data from 1970 01 2012 05 with 1987 01 2012 05 as the out of sample period unlike the previous literature on retail sales forecasting we not only look at a wide array of linear and nonlinear models but also generate multi step ahead forecasts using a real time recursive estimation scheme over the out of sample period to better mimic the practical scenario faced by economic agents making retailing decisions in addition we deviate from the uniform symmetric quadratic loss function typically used in forecast evaluation exercises by considering loss functions that overweight the forecast error in booms and recessions focusing on the results of single models alone shows that their performances differ greatly across forecast horizons and for different weighting schemes with no unique model performing the best across various scenarios however combination forecast models especially the discounted mean square forecast error method which weighs current information more than past not only produced better forecasts but were also largely unaffected by business cycles and time horizons this result along with individual nonlinear models performing better than linear models led us to conclude that theoretical research on retail sales should look at developing dynamic stochastic general equilibrium models that not only incorporate learning behavior but also allow the behavioral parameters of the model to be state dependent to account for regime switching behavior across alternative states of the economy

asymmetric information and the new theory of the firm financial constraints and risk behavior this paper summarizes recent developments in the theory of the firm that have arisen in examining the implications of imperfect information it shows that a wide range of these models have similar implications for the likely reaction of firms to external environmental and policy changes two significant implications are 1 that firms behave as if they are risk averse individuals maximizing a utility function of terminal wealth profitability even when the risks involved are unsystematic and 2 in many circumstances because this utility function is likely to be characterized by decreasing absolute risk aversion firms are likely to respond significantly and positively to changes in cash flow and profitability together these two phenomena are able to account for a wide range of firm behaviors that have been empirically observed both formally and informally and that are difficult to explain in terms of the traditional theory of the firm furthermore the responses of such firms to policy interventions are likely to differ significantly from those of neoclassical firms this abstract was borrowed from another version of this item

the diagnosis of an electricity crisis and alternative energy development in pakistan abstract the electricity sector in pakistan is currently facing the formidable challenges of an insufficient installed capacity a suboptimal infrastructure circular debt and revenue shortage all of these problems hamper socioeconomic activities this paper diagnoses the overall condition of the electricity sector as well as the potential and recent progress in the implementation of alternative energy projects in the context of the targets set in the national energy security plan nesp the assessment reveals the unsatisfactory overall progress of the implementation of the nesp in general and alternative energy in particular we assess that if the short term measures contained in the nesp have been adequately executed were enough to bridge the existing electricity supply demand gap and the country might not be facing an ongoing electricity crisis further we investigated the specific alternative energy policy issues that hinder this sector s development in pakistan we conclude that fuel diversification by means of the maximum utilisation of alternative energy resources would help in solving the crisis and would also furnish the long term energy needs of the country finally we recommend a comprehensive strategy for revamping the electricity sector and developing the alternative energy resources needed to tackle the ongoing electricity crisis in pakistan

is there a role for uncertainty in forecasting output growth in oecd countries evidence from a time varying parameter panel vector autoregressive model this paper uses a time varying parameter panel vector autoregressive tvp pvar model to analyze the role played by domestic and us news based measures of uncertainty in forecasting the growth of industrial production of 12 organisation for economic co operation and development oecd countries based on a monthly out of sample period of 2009 06 to 2017 05 given an in sample of 2003 03 to 2009 05 there are only 46 of cases where domestic uncertainty can improve the forecast of output growth relative to a baseline monetary tvp pvar model which includes inflation interest rate and nominal exchange rate growth besides output growth moreover including us uncertainty does not necessarily improve the forecasting performance of output growth from the tvp pvar model which includes only the domestic uncertainty along with the baseline variables so in general while uncertainty is important in predicting the future path of output growth in the 12 advanced economies considered a forecaster can do better in majority of the instances by just considering the information from standard macroeconomic variables