A typology of foreign exchange auction markets in sub-Saharan Africa : dynamic models for auction exchange rates

In this analytical sequel to"A Typology of Foreign Exchange Auction Markets in sub-Saharan Africa", the authors compare the micromanagement of different foreign exchange auctions in sub-Saharan Africa. Multi-unit auctions for foreign exchange were introduced in a number of countries in the 1980s and 1990s, in a transitional step toward a credible, sustainable, unified regime, such as efficient interbank market. But there is little understanding of how auction markets function in sub-Saharan Africa, and there has been virtually no research on the causes of frequent policy reversals or of auction failure. One possible cause of failure -- apart from thin markets, macroeconomic laxity, and vulnerability to terms-of-trade shocks and fluctuations in the disbursement of foreign aid -- is the inappropriate design and management of auctions. The authors estimate models for the microdeterminants of the auction rate, using weekly data on foreign exchange auctions for Ghana, Nigeria, Uganda, and Zambia. Among the policy lessons: 1) Nigeria and Zambia failed to unify and stabilize the exchange rate partly because there was no reserve price rule. When bidders learn such a rule, speculative bidding diminishes. 2) The management of a credible, sustainable reserve price policy requires an efficient secondary market. A simple underlying model, synthesized from the theoretical literature on auctions, specifies the auction rate as a function of fundamental variables and structural shift dummies. The repeated, sequential nature of these multi-unit auctions and the nonstationary nature of most of the auction variables are captured empirically by a cointegrated (error connection) framework. In addition to consistently estimating long-run and short-run parameters of auction fundamentals, the error correction model allows asymptotically efficient testing of three policy hypotheses deriving from auction theory: the competitiveness hypothesis, the effect of uncertainty on the auction-determined rate, and the revenue-equivalence hypothesis. In other words, they used these models to test the impact on the level of the auction rate of increased comptetition among bidders, of the effect of uncertainty (proxied by a volatile supply of foreign exchange), and of different pricing mechanisms.International Terrorism&Counterterrorism,Economic Theory&Research,Markets and Market Access,Access to Markets,Environmental Economics&Policies

An experimental comparison of sequential first- and second-price auctions with synergies

The presence of synergies in recurrent procurement auctions leads to an exposure problem and asymmetries among bidders. We consider sequential first- and second-price auctions with synergies in a setting with four bidders. In a series of experiments we compare the performance of the two pricing formats for three different sizes of the synergy. We find that for small synergies, the first-price auction performs better in terms of efficiency, revenue, and the probability on losses. However, once the synergy factor becomes very large the performance of the two different pricing formats becomes more similar. We also find that even though the potential total surplus that can be divided between buyers and seller increases in the synergy factor, subjects’ earnings within a pricing rule do not significantly change in the synergy factor. Finally, we observe that the two pricing formats give rise to different price trends within the auction sequence. In general, our results provide support for the common use of first-price instead of second-price auctions for public procurement.industrial organization ;

Online auctions in procurement : the cost/goodwill tradeoff

Thesis (M.Eng.)--Massachusetts Institute of Technology, Engineering Systems Division, 2000.Includes bibliographical references (leaf 44).Industry is rapidly adopting online auctions. Many of these auctions are occurring in the procurement of component supplies. While there are tremendous expectations for this technology, there is little data or study looking at the implications of the technology. This thesis aims to provide some insight into this topic. Primarily using data collected in a study of auctions in the procurement of automotive components, this thesis looks at the costs and benefits of using online auctions in procurement. The thesis specifically addresses the cost vs. supplier goodwill tradeoff present in procurement auction. After quantifying these variables and answering associated questions, the thesis provides a framework for evaluating the use of online auctions in industry in general. The thesis concludes with a list of suggested further research into this important subject.Tyler J. Rameson.M.Eng

Water Consumption and Long-Run Urban Development: The Case of Milan

Analyses of long run consumption series are rare in literature. We study the evolution of water consumption in Milan in the twentieth century. The objective is twofold: on one side, the univariate analysis tries both to assess the impact of relevant socio-economic and environmental changes on water consumption in Milan and verify if consumers have deeply rooted consumption habits. On the other side, the multivariate analysis is used to identify the socio-economic factors that are relevant in explaining consumption evolution. Results indicate both that water users have well entrenched consumption habits and that population, climate and economic structure behave more similarly, in Euclidean terms, to water consumption than to other economic and social variables.Urban consumption, Long-run, Development, Environmental changes

Are EU Environmental Policies Too Demanding for New Members States?

In 2004, ten new states entered the European Union. Relative to the pre-2004 member states, these accession states have lower environmental standards, and some worry that it will be too demanding for these new EU members to fully comply with European environmental provisions. In this paper, we assess one rationale for such harmonization. Specifically, we analyze the determinants of environmental policies’ stringency, and show that differences in corruption levels are more important as explanatory factor when compared to income differentials. Since high levels of corruption characterize some countries in the enlarged EU, we argue that this is a good reason for an upward harmonization of environmental policies at the EU level.Corruption, European union, Environmental policy

Descending Price Optimally Coordinates Search

Investigating potential purchases is often a substantial investment under uncertainty. Standard market designs, such as simultaneous or English auctions, compound this with uncertainty about the price a bidder will have to pay in order to win. As a result they tend to confuse the process of search both by leading to wasteful information acquisition on goods that have already found a good purchaser and by discouraging needed investigations of objects, potentially eliminating all gains from trade. In contrast, we show that the Dutch auction preserves all of its properties from a standard setting without information costs because it guarantees, at the time of information acquisition, a price at which the good can be purchased. Calibrations to start-up acquisition and timber auctions suggest that in practice the social losses through poor search coordination in standard formats are an order of magnitude or two larger than the (negligible) inefficiencies arising from ex-ante bidder asymmetries.Comment: JEL Classification: D44, D47, D82, D83. 117 pages, of which 74 are appendi

From Government to Regulatory Governance: Privatization and the Residual Role of the State

This paper reviews the state of thinking on the governance role of public ownership and control. We argue that the transfer of operational control over productive assets to the private sector represents the most desirable governance, due to the inherent difficulty for citizens to constrain political abuse relative to the ability of governments to regulate private activity. However in weak institutional environments the process needs to be structured so as to avoid capture of the regulatory process. The speed of transfer should be timed on the progress in developing a strong regulatory governance system, to which certain residual rights of intervention must be vested. After all, what are “institutions” if not governance mechanisms with some degree of autonomy from both political and private interests? The gradual creation of institutions partially autonomous from political power must become central to the development of an optimal mode of regulatory governance. We advance some suggestions about creating accountability in regulatory governance, in particular creating an internal control system based on a rotating board representative of users, producers and civil society, to be elected by a process involving frequent reporting and disclosure.Regulatory Governance, Privatization

Oil Prices, Inflation and Interest Rates in a Structural Cointegrated VAR Model for the G-7 Countries

Sharp increases in the price of oil are generally seen as a major contributor to business cycle asymmetries. Moreover, the very recent highs registered in the world oil market are causing concern about possible slowdowns in the economic performance of the most developed countries. While several authors have considered the direct channels of transmission of energy price increases, other authors have argued that the economic downturns arose from the monetary policy response to the inflation presumably caused by oil price increases. In this paper a structural cointegrated VAR model has been considered for the G-7 countries in order to study the direct effects of oil price shocks on output and prices and the reaction of monetary variables to external shocks. Empirical analysis shows that, for most of the countries considered, there seems to be an impact of unexpected oil price shocks on interest rates, suggesting a contractionary monetary policy response directed to fight inflation. In turn, increases in interest rates are transmitted to real economy by reducing output growth and the inflation rate.Oil price shocks, Monetary policy response, Structural VAR models

Security of Energy Supply: Comparing Scenarios From a European Perspective

This paper compares different results from a set of energy scenarios produced by international energy experts, in order to analyze projections on increasing European external energy dependence and vulnerability. Comparison among different scenarios constitutes the basis of a critical review of existing energy security policies, suggesting alternative or complementary future actions. According to the analysis, the main risks and negative impacts in the long term could be the increasing risk of collusion among exporters due to growing dependence of industrialized countries and insufficient diversification; and a risk of demand/supply imbalance, with consequent instability for exporting regions due to insufficient demand, and lack of infrastructures due to insufficient supply. Cooperation with exporting countries enhancing investments in production capacity, and with developing countries in order to reinforce negotiation capacity of energy importing countries seem to be the most effective policies at international level.Energy security, Energy scenarios, Oil and natural gas markets