Definition of a Balancing Point for Electricity Transmission Contracts

Electricity transmission contracts allocate scarce resources, allow hedging against locational price differences and provide information to guide investment. Liquidity is increased if all transmission contracts are defined relative to one balancing point, then a set of two contracts can replicate any point to point contract. We propose an algorithm and apply it to the European electricity network to identify a well connected balancing point that exhibits minimal relative cross-price responses and hence reduces market power exercised by generation companies. Market level data which is difficult to obtain or model such as price levels in different regions or that is dependent on the time scale of interaction, as demand elasticity, is not required. The only critical input quantities are assumptions on future transmission constraint patterns

Predatory Trading

This paper studies predatory trading: trading that induces and/or exploits other investors' need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed. Further, a trader profits from triggering another trader's crisis, and the crisis can spill over across traders and across markets.

Assessing the performance of real estate auctions

This paper investigates the performance of real estate auctions in selling real estate relative to the more traditional method of negotiated sale. Estimates from auctions in Los Angeles during the boom of the mid 1980s show a discount that ranges between 0 and 9 percent, while similar sales in Dallas during the real estate bust of the late 1980s obtained discounts in the 9 to 21 percent range. This evidence is censistent with a theory that predicts larger percentage discounts in down markets. Although these results differ from previous studies of U.S. auctions that find much larger discounts, a comparison of methodologies suggests that previous papers that use a hedonic equation suffer from a selection bias problem, pushing auction coefficients towards finding larger discounts. Another interesting finding is that publishing a reserve price does not affect the estimated auction prices. Finally, the study notes that scattered-site auctions sell at a larger discount than the more homogeneous sales of single-site condominiums and finds no evidence of price declines over the course of an auction. The paper concludes that despite the discounts, auctions are still a viable sales strategy, especially for large sellers that face high holding costs and long average sales times, and for developers of single-site condominium complexes.Real property

"Minskyan Perspective, Part II--Treasury, CRMPG Reports, Financial Stability Forum"

This four-part study is a critical analysis of several reports dealing with the reform of the financial system in the United States. The study uses Minsky's framework of analysis and focuses on the implications of Ponzi finance for regulatory and supervisory policies. The main conclusion of the study is that, while all reports make some valuable suggestions, they fail to deal with the socioeconomic dynamics that emerge during long periods of economic stability. As a consequence, it is highly doubtful that the principal suggestions contained in the reports will provide any applicable means to limit the worsening of financial fragility over periods of economic stability. The study also concludes that any meaningful systemic and prudential regulatory changes should focus on the analysis of expected and actual cash flows (sources and stability) rather than capital equity, and on preventing the emergence of Ponzi processes. The latter tend to emerge over long periods of economic stability and are not necessarily engineered by crooks. On the contrary, the pursuit of economic growth may involve the extensive use of Ponzi financial processes in legal economic activities. The study argues that some Ponzi processes--more precisely, pyramid Ponzi processes--should not be allowed to proceed, no matter how severe the immediate impact on economic growth, standards of living, or competitiveness. This is so because pyramid Ponzi processes always collapse, regardless how efficient financial markets are, how well informed and well behaved individuals are, or whether there is a "bubble" or not. The longer the process is allowed to proceed, the more destructive it becomes. Pyramid Ponzi processes cannot be risk-managed or buffered against; if economic growth is to be based on a solid financial foundation, these processes cannot be allowed to continue. Finally, a supervisory and regulatory process focused on detecting Ponzi processes would be much more flexible and adaptive, since it would not be preoccupied with either functional or product limits, or with arbitrary ratios of "prudence." Rather, it would oversee all financial institutions and all products, no matter how new or marginal they might be. See also, Working Paper Nos. 574.1, 574.3, and 574.4.

‘Definition of a Balancing Point for Electricity Transmission Contracts’

Electricity transmission contracts allocate scarce resources, allow hedging against locational price differences and provide information to guide investment. Liquidity is increased if all transmission contracts are defined relative to one balancing point, then a set of two contracts can replicate any point to point contract. We propose an algorithm and apply it to the European electricity network to identify a well connected balancing point that exhibits minimal relative cross-price responses and hence reduces market power exercised by generation companies. Market level data which is difficult to obtain or model such as price levels in different regions or that is dependent on the time scale of interaction, as demand elasticity, is not required. The only critical input quantities are assumptions on future transmission constraint patterns.Transmission contract design, Congestion management, Market Power, European electricity network

Institutional, policy and regulatory framework for sustainable development of the Egyptian aquaculture sector

This report presents the findings of a mission to critically review the institutional, policy and regulatory framework for sustainable development of the Egyptian aquaculture sector. The study was undertaken by an International Expert on Aquaculture Policy, and a National Expert on Institutions, on behalf of the Project “Improving Employment and Income through the Development of Egypt’s Aquaculture Sector“, implemented by WorldFish and CARE, and funded by the Swiss Agency for Development and Cooperation(SDC). The objective of the mission was to assess the current status of the Egyptian aquaculture sector, in terms of the policy, legal and institutional environment, with a view to suggesting the major issues to be addressed within a future policy dialogue

International contagion - implications for policy

The authors try to identify and evaluate the public policy implications of financial crises. In this model, financial contagion can be driven by a combination of fundamentals and by self-fulfilling market expectations. The model allows the authors to identify different notions of contagion, especially the distinction between"monsoonal effects","spillovers", and"switchers between equilibria". They discuss both domestic and international policy options. Domestic policies, they say, should be aimed at reducing financial fragility - that is, reducing unnecessary short-term debt commitments. With explicit commitments, the maturity of external debts should be lengthened. With implicit commitments, such as private liability guarantees, they emphasize limiting or eliminating such guarantees, to improve an economy's international liquidity and reduce its exposure to contagion. Internationally, they stress the need for improving financial standards, which makes it easier to assess when a country is subject to different kinds of contagion. The effectiveness of international rescue packages depends on the kind of contagion to which a country is exposed. Implications: the international community should help those countries that are already helping themselves.Financial Crisis Management&Restructuring,Financial Intermediation,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies

Subsidies for technology adoption: experimental evidence from rural Cameroon

We use a two-stage experiment to study how a short-term subsidy for a new product affects uptake, usage, and future demand for the same product (a new solar lamp). We use an auction design to gauge willingness-to-pay, and randomly vary the strike price across villages to create random variation in purchase prices and uptake across villages. Our main results are that subsidies do not adversely affect subsequent product use, but stimulate uptake. If subsidies depress future willingness-to-pay, then this effect is outweighed by additional learning about the benefits of the new product. The net effect is that short-term subsidies increase future willingness-to-pay. However; prices play an important allocative role, and lowering prices via subsidies encourages uptake by households with low use intensity. We do not find any evidence supporting social learning and anchoring beyond the initial sample of beneficiaries