Free Survey Articles

The question whether central banks should bear responsibility for financial stability

remains unanswered. In connection with the use of interest rates, it is therefore not

clear whether and how the Taylor rule should be augmented by an additional financial

stability term. This paper reviews the normative and positive literature on Taylor rules

augmented with exchange rates, asset prices, credit, and spreads. These measures

have evolved as common indicators of financial (in)stability in the Taylor rule literature.

In addition, our own analysis describes the development of these indicators for

the core and the periphery of the Eurozone. Given the high degree of heterogeneity

between euro area countries, the conclusion here is that an interest rate reaction to

instability by the European Central Bank would be inappropriate in times of crisis.

However, this conclusion is somewhat weakened if there is no crisis.

Telecommunications policy has come a long way from regulation of vertically integrated 

monopolies to the current state of competition. As competition becomes selfsustainable, will telecommunications policy in the form of industry-specific regulation go away or, if not, what form will it take? The economics literature suggests that the regulatory efficiency frontier is shifted by new technological and market developments, such as convergence of networks, fixed-mobile substitution (and integration) and next generation access networks. The frontier is also affected by the existing capital stock and other physical and institutional characteristics of a country. The insights from a review of the theoretical and empirical literature are applied to five policy areas. They are: (1) termination monopoly; (2) local bottleneck access; (3) net neutrality; (4) spectrum management; and (5) universal service. While in some of them, deregulation and a move to competition policy will soon be the efficient state of the art, regulation will remain efficient in others for some time. Deregulation will likely become efficient for one-way access and universal service, with the exception of some universal service policies in remote areas and for the poor. Termination will move to bill and keep with a duty to interconnect. In addition, some (more symmetric) regulation should persist for net neutrality in the form of transparency requirements, (quasi-) common carrier obligations and minimum quality standards. Also, spectrum management, while moving towards full-blown ownership rights, will continue to see regulators providing zoning and other services, particularly for unlicensed spectrum. All these assessments are premised on the success of making additional spectrum as the key resource available. They are also premised on the absence of a killer technology like P2P FTTH that potentially dominates all other technologies. What determines the endgame in telecommunications regulation? Although technical and market developments will dominantly shape the regulatory efficiency frontier, institutional and political economy factors have an additional and mostly slowing effect on policy changes.