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Europe Economics provided advice to the CAA on the use of long-run incremental cost (LRIC) estimates in assessing the competitive price level and the existence of market power, in December 2012.  The CAA has published our work as part of its ‘Minded To’ report for the Stansted Market Power Assessment.   Our work is also referenced in the CAA’s initial proposals for economic regulation at Stansted.   Our work on LRIC is also referenced in the CAA’s initial proposals for economics regulation for Gatwick Airport.  This document includes GAL’s comments on our work and our response.

Europe Economics was recently commissioned by the World Gold Council to investigate the performance of gold relative to other asset classes on liquidity measures to be used by the European Banking Authority (EBA) in determining assets eligible for the Liquidity Coverage Ratio (LCR) as part of the Capital Requirements Directive (CRD-IV).  CRD-IV is the implementation of Basel III recommendations at the EU level.  We lay out a theory of liquidity, critique the EBA’s proposed analysis in light of our theory, and offer some quantitative measures of theoretical aspects of liquidity not covered by the EBA.  We find that gold performs very well on the “correlation of price with need to sell” measure of liquidity and comparably to equities and fixed income on relative spread measures.  We also discuss why we believe gold would perform very well on the “diversity of asset holders” aspect of liquidity.  Taken as a whole, our research argues that to ignore certain key aspects of liquidity currently not covered by the proposed EBA assessment would bias the assessment against gold and potentially render the LCR inadequate in assuring liquidity in times of financial stress.

The UK Government intends to transfer responsibility for the regulation of consumer credit from the Office of Fair Trading to the Financial Conduct Authority. Europe Economics has worked in collaboration with Policis to understand the implications of the new regime.  This report contains Europe Economics’ analysis of the impacts on the incremental costs of compliance and the impact of these cost changes on expected firm behaviour.

The World Gold Council (WGC) has commissioned Europe Economics to provide a politico-economic assessment of its proposal for the use of gold as collateral for Eurozone sovereign debt, especially the debt of Italy and Portugal. The executive brief, which summarises the WGC’s proposal, considering its merits relative to other ECB schemes such as the Outright Monetary Transactions (OMT) programme, may be downloaded here.

Europe Economics and Consumers International have recently collaborated on a paper dealing with supermarkets and their relationships with suppliers and consumers.  Bob Young of Europe Economics recently spoke on this topic at a conference organised by the Oxford University Faculty of Law (the Centre for Competition Law and Policy).  The full paper runs to thirty pages and the summary to ten. Both may be downloaded here.