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Ebook The Inflationary Impact of Wage Indexation

Submitted by wulan on Mon, 06/14/2010 - 06:53

It has often been said that indexed contracts advance inflation. On one hand, wage indexation increases the slope of the Phillips curve and makes it more difficult to use monetary policy for stabilizing employment. Indexed bonds prevent that inflation depreciates the real value of government debt and indexed tax schemes decouple real revenues of a progressive income tax from inflation.

Thereby, indexation reduces the government’s gains from inflation and its incentive for expansionary monetary policy. On the other hand, indexation reduces social costs of inflation and the central bank’s resistance to inflationary policy. These two effects influence the inflation bias in opposite directions, and within the standard model of monetary policy by Barro and Gordon (1983) it is not clear under which circumstances one or the other effect dominates (Mourmouras, 1993).

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Ebook Banking on Bad Credit: New Research on the Subprime Home Mortgage Market

Submitted by wulan on Wed, 07/22/2009 - 06:22

Since the early 1990s, the rapid growth of the subprime home mortgage market has arguably been the most important development in alternative financial services and undoubtedly the most controversial. Thus, it comes as no surprise that three of the papers presented on the alternative financial services panel of Promises and Pitfalls report new research on the subprime home loan market and related issues.

The subprime home loan market, designed for borrowers with weak credit, continues to evolve at a breakneck pace. The past five years has witnessed the institutionalization of subprime lending, with the locus of subprime loans shifting from small, independent lenders to large mortgage subsidiaries of banks (particularly national banks). Roughly two-thirds of subprime home loans are securitized on Wall Street, and investment banks and their affiliates increasingly are not only underwriting subprime securitizations but originating loans in subprime loan pools as well.

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Ebook Regulation and the Leverage of Local Market Power in the California Electricity Market

Submitted by wulan on Sat, 05/29/2010 - 06:39

The electricity sectors of many countries are undergoing a transition from either state-ownership or regulated franchise monopoly to an organization that is more market-oriented. Despite the general move to market-based pricing, regulators of electricity markets around the world continue to struggle with the problem of incentivizing generators whose output, due to their location in the grid, has no viable substitutes.

Such generators possess ‘local’ monopoly power, and in deregulated settings have frequently been able to extract significant rents from their advantageous locations within a power system. Since strategically located generators also simultaneously compete in broader regional markets, the actions taken to exploit local market power can also effect market outcomes over larger areas. Similarly, regulatory mechanisms intended to mitigate local market power can also effect competition far beyond the geographic scope of their control.

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