Foreign exchange swaps

Foreign exchange swaps have appeared for some time in the intervention toolkit of many central banks around the world, although their popularity seems to be on the wane. In a Bank for International Settlements survey taken in 1997 (BIS 1997, p. 332), seven of fourteen industrial-country central banks surveyed listed foreign exchange swaps against either the U.S. dollar or the deutsche mark (or both) among the tools used to conduct open market intervention. Of those seven, five-Austria, Belgium, Germany, Italy, and the Netherlands-discontinued foreign exchange operations when they became part of the European Monetary Union. Of the remaining two, Australia and Switzerland, only the latter has used foreign exchange swaps extensively, at some point as its main intervention tool, with the total amount of swaps hovering for years at about 40 percent of the monetary base. This use partly reflected the limited depth of domestic debt markets associated with limited fiscal deficits historically incurred by the Swiss government.Swaps (Finance) ; Foreign exchange ; Banks and banking, Central ; Open market operations

Integrated versus Separated Regulation: An Application to the Water Industry

The regulation of monopolistic firms has been widely investigated in the economic literature. Particular emphasis has been placed on the relationship between the regulated monopolist and the regulator. The present work deals with problems that may arise from the presence of several regulators. If regulators have different objective functions, inefficiency is likely to arise. A theoretical model with two regulators, one monopolistic firm and a renewable natural resource is presented. In this set up the level of demand relative to the sustainable use of the water resource plays a major role. The main result is the characterization of the cases in which the outcome of the regulation actually differs between the integrated-regulator and the separate-regulator scenarios. We find that the main determinants of the equilibrium are the level of demand and the marginal environmental damage. The equilibria obtained are analyzed in terms of price, environmental tax levels, and in terms of welfare distribution among the components of the regulator(s)' objective function.

Market Efficiency and Coalition Structures

We consider a three-stage game in which symmetric firms decide whether to invest in a cost-reducing technology, then they have the possibility to merge (forming coalitions), and eventually, in the third stage, a Cournot oligopoly game is played by the resulting firms (coalitions). We show that, contrary to the existing literature, the monopoly market structure may fail to form even when the number of initial firms is just three. We then introduce a weighted sharing rule and show that a situation in which all firms acquire the cost-reducing asset cannot be sustained as a Subgame Perfect Equilibrium.

Monetary policy in pre-ECB Italy

In 1979, Italy entered into the Exchange Rate Mechanism (ERM) as a founding member of the European Monetary System. After that date, the country's monetary policy was geared toward the maintenance of exchange rate stability against its ERM partners, despite a number of exchange parity realignments and with the exception of the period from September 1992 to November 1996. The strength of the ERM commitment was not uniform over time, either in terms of amplitude of the fluctuation band or in terms of frequency of realignment of bilateral parities. Despite this variability, however, changes in official rates-the discount rate and the rate on fixed term advances-were overwhelmingly linked throughout the ERM period to developments in foreign exchange markets.Monetary policy - Italy ; Banks and banking, Central - Italy ; Bank of Italy

Negative externalities as the engine of growth in an evolutionary context

We present a simple growth model which has two original features: the strategic context considered, which is an evolutionary game, and the growth mechanism described, in which growth is caused by negative externalities. The emphasis in this growth mechanism is evidently different from that placed on positive externalities by current endogenous growth models. In this model welfare depends on three goods: leisure, a free environmental renewable resource, and a non-storable output. The environmental resource is subject to negative externalities, that is, it is deteriorated by the production of the output. Faced with a forced reduction of the resource, agents may react by increasing the labor supply in order to produce and consume substitutes for the diminishing resource, i. e. they can raise their defensive expenditures. The increase in production and consumption that follows, i.e. growth, generates a further deterioration of the environmental resource, thus giving rise to a self-feeding growth process. The conditions under which multiple equlibria and Pareto-worsening growth dynamics arise, are analysed. Beside showing the logical possibility that negative externalities are the engine of growth, we suggest that the case analysed may be of practical relevance, i.e., that negative externalities may play an important role in many episodes of growth. This role is widely recognized by social sciences other than economics. We suggest that the model may be interpreted as a push development model and that it may also contribute to explain some aspects of growth in advanced countries

Fiscal Rules and the Opportunistic Behaviour of the Incumbent Politician: Evidence from Italian Municipalities

Previous studies on electoral competition show that fiscal variables are manipulated by incumbent politicians in order to be re-elected. This phenomenon has been addressed by the literature on electoral budget cycle and, in a decentralised economy, by the literature on yardstick competition. Our objective is to consider the effect of the introduction of a fiscal rule on the opportunistic behaviour of incumbent politicians. We conduct a panel data analysis on the current expenditures of 246 Italian municipalities. The introduction of the domestic stability pact (DSP) seems to change the electoral cycle, by increasing the magnitude of the expenditures during pre-electoral periods. Moreover, our results show that municipalities affected by the DSP are more sensitive to changes in neighbouring jurisdictions’ fiscal policies, during pre-electoral periods. We conclude that the introduction of the DSP, besides significantly reducing the level of local public spending, strengthens the opportunistic behaviour of incumbent politicians in pre-electoral years.fiscal rules, electoral budget cycle, yardstick competition, system GMM, spatial econometrics

Self-* overload control for distributed web systems

Unexpected increases in demand and most of all flash crowds are considered the bane of every web application as they may cause intolerable delays or even service unavailability. Proper quality of service policies must guarantee rapid reactivity and responsiveness even in such critical situations. Previous solutions fail to meet common performance requirements when the system has to face sudden and unpredictable surges of traffic. Indeed they often rely on a proper setting of key parameters which requires laborious manual tuning, preventing a fast adaptation of the control policies. We contribute an original Self-* Overload Control (SOC) policy. This allows the system to self-configure a dynamic constraint on the rate of admitted sessions in order to respect service level agreements and maximize the resource utilization at the same time. Our policy does not require any prior information on the incoming traffic or manual configuration of key parameters. We ran extensive simulations under a wide range of operating conditions, showing that SOC rapidly adapts to time varying traffic and self-optimizes the resource utilization. It admits as many new sessions as possible in observance of the agreements, even under intense workload variations. We compared our algorithm to previously proposed approaches highlighting a more stable behavior and a better performance.Comment: The full version of this paper, titled "Self-* through self-learning: overload control for distributed web systems", has been published on Computer Networks, Elsevier. The simulator used for the evaluation of the proposed algorithm is available for download at the address: http://www.dsi.uniroma1.it/~novella/qos_web