Independent Utility Regulators: Lessons from Monetary Policy
This paper explores the similarity of the underlying economic problems that lead to the establishment of (a) independent central banks to operate national monetary policies and (b) independent regulatory agencies for telecommunications and other utility service industries. We show that, in both cases, the adoption of agencies inde- pendent of government results from the need to achieve credibility and a reputation for economically sound long-run behaviour while preserving signi¯cant discretion to handle unanticipated events. We show that this solution is superior to policy rules that are ¯xed in advance. Both for central banks and regulatory agencies, what is re- quired are institutions that provide limited and accountable discretion within a clear policy framework, for example via high levels of accountability and transparency in their decision making processes. On the basis of a review of the empirical literature, we argue that central banks with superior governance arrangements, particularly on accountability and transparency, out-perform those with inferior arrangements and we discuss how this work might be extended to utility regulatory agencies.
|Date of creation:||Feb 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Guildford, Surrey GU2 5XH|
Phone: (01483) 259380
Fax: (01483) 259548
Web page: http://www.surrey.ac.uk/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier Boylaud & Giuseppe Nicoletti, 2000.
"Regulation, Market Structure and Performance in Telecommunications,"
OECD Economics Department Working Papers
237, OECD Publishing.
- Olivier Boylaud & Giuseppe Nicoletti, 2003. "Regulation, market structure and performance in telecommunications," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 99-142.
- Currie, David & Levine, Paul L & Rickman, Neil, 1999. "Delegation and the Ratchet Effect: Should Regulators Be Pro-Industry?," CEPR Discussion Papers 2274, C.E.P.R. Discussion Papers.
- Levine, Paul L & Rickman, Neil, 2002.
"Price Regulation, Investment and the Commitment Problem,"
CEPR Discussion Papers
3200, C.E.P.R. Discussion Papers.
- Paul Levine & Neil Rickman, 2003. "Price Regulation, Investment and the Commitment Problem," School of Economics Discussion Papers 0603, School of Economics, University of Surrey.
- Cowen, T. & Glazer, A. & Zajc, K., 1995.
"Credibility May Require Discretion, not Rules,"
94-95-27, California Irvine - School of Social Sciences.
- Paul L. Joskow, 2001.
"California's Electricity Crisis,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 17(3), pages 365-388.
- Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
- Spulber, Daniel F & Besanko, David, 1992. "Delegation, Commitment, and the Regulatory Mandate," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(1), pages 126-54, March.
- Abdala, Manuel A., 2000. "Institutional roots of post-privatisation regulatory outcomes," Telecommunications Policy, Elsevier, vol. 24(8-9), pages 645-668, September.
- Faust, J. & Svensson, L.E.O., 1998.
"Transparency and Credibility: Monetary Policy with Unobservable Goals,"
636, Stockholm - International Economic Studies.
- Faust, Jon & Svensson, Lars E O, 2001. "Transparency and Credibility: Monetary Policy with Unobservable Goals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 369-97, May.
- Jon Faust & Lars E. O. Svensson, 1998. "Transparency and credibility: monetary policy with unobservable goals," International Finance Discussion Papers 605, Board of Governors of the Federal Reserve System (U.S.).
- Jon Faust & Lars E. O. Svensson, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," NBER Working Papers 6452, National Bureau of Economic Research, Inc.
- Svensson, Lars E.O. & Faust, John, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," Seminar Papers 636, Stockholm University, Institute for International Economic Studies.
- Faust, Jon & Svensson, Lars E O, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," CEPR Discussion Papers 1852, C.E.P.R. Discussion Papers.
- Ros, Agustin J, 1999. "Does Ownership or Competition Matter? The Effects of Telecommunications Reform on Network Expansion and Efficiency," Journal of Regulatory Economics, Springer, vol. 15(1), pages 65-92, January.
- Pablo T. Spiller & Ingo Vogelsang, 1997. "The Institutional Foundations of Regulatory Commitment in the UK: The Case of Telecommunications," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(4), pages 607-, December.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Paul Levine & Joseph Pearlman, 2002. "Delegation and Fiscal Policy in the Open Economy: More Bad News for Rogoff's Delegation Game," Open Economies Review, Springer, vol. 13(2), pages 153-174, April.
- Alexander, Ian & Mayer, Colin & Weeds, Helen, 1996. "Regulatory structure and risk and infrastructure firms : an international comparison," Policy Research Working Paper Series 1698, The World Bank.
- Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
- Brown, Gordon, 2001. "The Conditions for High and Stable Growth and Employment," Economic Journal, Royal Economic Society, vol. 111(471), pages C30-44, May.
- Levine, Paul & Currie, David, 1985. "Optimal feedback rules in an open economy macromodel with rational expectations," European Economic Review, Elsevier, vol. 27(2), pages 141-163, March.
When requesting a correction, please mention this item's handle: RePEc:sur:surrec:0403. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ioannis Lazopoulos)
If references are entirely missing, you can add them using this form.