Focusing on Demand Side Management in the Future of the Electric Grid

The widespread blackout that occurred on August 14, 2003 (“the blackout”) exposed the weaknesses of the current electric transmission grid structure, and underscored the need for improvements to the transmission grid in the United States. The outage knocked out power to approximately fifty million people in Ohio, Michigan, Pennsylvania, New York, Vermont, Massachusetts, Connecticut, New Jersey and the Canadian province of Ontario.\ud The total cost in the United States was estimated to be between $4 and$10 billion

Modeling a Distribution of Mortgage Credit Losses

One of the biggest risks arising from financial operations is the risk of counterparty default, commonly known as a “credit risk”. Leaving unmanaged, the credit risk would, with a high probability, result in a crash of a bank. In our paper, we will focus on the credit risk quantification methodology. We will demonstrate that the current regulatory standards for credit risk management are at least not perfect, despite the fact that the regulatory framework for credit risk measurement is more developed than systems for measuring other risks, e.g. market risks or operational risk. Generalizing the well known KMV model, standing behind Basel II, we build a model of a loan portfolio involving a dynamics of the common factor, influencing the borrowers’ assets, which we allow to be non-normal. We show how the parameters of our model may be estimated by means of past mortgage deliquency rates. We give a statistical evidence that the non-normal model is much more suitable than the one assuming the normal distribution of the risk factors. We point out how the assumption that risk factors follow a normal distribution can be dangerous. Especially during volatile periods comparable to the current crisis, the normal distribution based methodology can underestimate the impact of change in tail losses caused by underlying risk factors.Credit Risk, Mortgage, Delinquency Rate, Generalized Hyperbolic Distribution, Normal Distribution

Welfare Impacts of Electricity Generation Sector Reform in the Philippines

This paper reports an empirical investigation into the welfare impacts of an introduction of private sector participation into the Philippines electricity generation sector, by liberalizing the market for independent power producers (IPPs) during the power crisis of 1990-1993. This study uses a social cost and benefit analysis. The main benefits came from IPPs, who contributed to resolving the crisis, and promoted economic and social development. Consumers and investors are net gainers, while the Government lost and there was an air pollution cost. The paper concludes that the reform with private sector participation increased social welfare

What Were They Thinking? The Federal Reserve In The Run-Up To The 2008 Financial Crisis

The Federal Reserve (the Fed) is responsible for monitoring, analyzing and ultimately stabilizing US financial markets. It also has unrivalled access to economic data, high-level connections to financial institutions, and a large staff of professionally trained economists. Why then was it apparently unconcerned by the financial developments that are now widely recognized to have caused the 2008 financial crisis? Using a wide range of Fed documents from the pre-crisis period, particularly the transcripts of meetings of the Federal Open Market Committee (FOMC), this paper shows that Fed policymakers and staff were aware of relevant developments in financial markets, but paid infrequent attention to them and disregarded significant systemic threats. Drawing on literatures in economics, political science and sociology, the paper then demonstrates that the Fed\u27s intellectual paradigm in the years before the crisis focused on ‘post hoc interventionism’ – the institution\u27s ability to limit the fallout should a systemic disturbance arise. Further, the paper argues that institutional routines played a crucial role in maintaining this paradigm and in contributing to the Fed\u27s inadequate attention to the warning signals in the pre-crisis period

Net neutrality discourses: comparing advocacy and regulatory arguments in the United States and the United Kingdom

Telecommunications policy issues rarely make news, much less mobilize thousands of people. Yet this has been occurring in the United States around efforts to introduce "Net neutrality" regulation. A similar grassroots mobilization has not developed in the United Kingdom or elsewhere in Europe. We develop a comparative analysis of U.S. and UK Net neutrality debates with an eye toward identifying the arguments for and against regulation, how those arguments differ between the countries, and what the implications of those differences are for the Internet. Drawing on mass media, advocacy, and regulatory discourses, we find that local regulatory precedents as well as cultural factors contribute to both agenda setting and framing of Net neutrality. The differences between national discourses provide a way to understand both the structural differences between regulatory cultures and the substantive differences between policy interpretations, both of which must be reconciled for the Internet to continue to thrive as a global medium