This thesis evaluates the effect of electricity co-operation regarding import and export on electricity prices for OECD countries and on CO2 emissions for the world. In addition, the study investigates which kinds of renewable energies provide the best economic future for Canada and the U.S. There are three main sections to the thesis. Firstly, panel data analysis determines the electricity price functions, using 29 OECD countries’ yearly data from 1980 to 2007. Membership of the European Union, used to investigate effect of high level co-operation on price, is seen to decrease household and industry prices, but is not significant for household price. The effect of electricity trading in OECD countries is not found to deliver cheaper electricity suggesting that these countries need to co-operate more closely to increase competition and improve efficiency in electricity markets. Secondly, panel data analysis determines parameters of the CO2 emissions function, using 131 countries’ yearly data from 1971 to 2007. The world results show that electricity co-operation is highly significant in decreasing CO2 emissions per unit of generation, thus supporting the hypothesis. At the continent level, Asia shows the highest CO2 decrease from electricity import, with the lowest decrease being for Africa. Electricity export for North America, Latin America and Europe is found to be highly significant in decreasing CO2 emissions. Finally, time series analysis of yearly data for Canada and the U.S. from 1978 to 2009 is used to determine the electricity price functions. For Canada, electricity import is found to be highly significant in decreasing household electricity price, but not so for the U.S. Renewable energies such as wind and hydro are seen to be the future of electricity generation for Canada, but the results for the U.S. indicate that no type of renewable energy can reduce electricity price.

Evidence from various countries over the past two decades proves that swings in house prices have been concomitant with financial instability. The history of financial crises shows that the six biggest banking crises in advanced economies were accompanied by housing busts. Despite the abundance of literature on the forces behind the financial crisis, and in particular studies investigating the connections between financial stability and disturbances in the real estate market, fundamental questions still wait for convincing answers, such as: (i) To what extent is regional heterogeneity in property price increases reflected in dissimilarity in the evolution of credit default? (ii) What role do borrower-related factors such as housing affordability and household indebtedness, and financial market-related factors such as financial developments, play on the growth of bad loans as a main concern for banking sector? (iii) To which extent do banks’ lending behaviour and property prices undermine the stability of the banking sector, and what are the directions of causality between credit defaults, property prices and banks’ lending behaviour? The goal of this thesis is to investigate these issues and explain the practical implications of the findings. This thesis contains three empirical essays. The first essay explores the nexus between house prices and non-performing loans (NPLs), concentrating on the extent to which geographical variations in house prices are translated into regional variations in credit defaults. The stochastic dominance approach has been used for this purpose, with 372 individual US banks. The stochastic dominance analyses disclose symmetric behaviour between NPLs and the scale of house price increments. The essay is further extended by employing Arellano and Bond’s (1991) GMM model to explore the effect of GDP, unemployment rates, lending interest rates and house prices on the growth of NPLs. The outcomes of the GMM estimations reveal a high explanatory power of economic growth, unemployment and lending interest rates on NPLs. In an additional analysis, a generalised panel threshold model is estimated to check for the presence of a threshold point, above which different impacts of house prices might be found. The threshold model specifications provide a threshold point, in relation to which two different impacts of house prices on the evolution of NPLs are estimated. A general consensus in the literature attributes credit defaults to a wide-ranging spectrum of drivers that take into consideration borrower-related factor, lender-related factors and factors related to financial and real estate markets. The second essay attempts to answer the second question mentioned above, by investigating the impact of borrower-related factors, lender-related factors and financial market-related factors in driving NPLs. The impact of these factors on the evolution of impaired loans is explored by estimating fixed effect models then the analysis is extended to dynamic models using the GMM procedure on an annual balanced panel dataset. Household vulnerability, financial developments and housing affordability are found to be significant contributors to the growth of NPLs. The interaction mechanism between the real estate market and the financial system has often been blamed for being the root of financial crises, through the accumulation of housing market bubbles that leads to the ultimate collapse of the financial markets. The third essay, using the Autoregressive Distributed Lag technique, looks for the presence of cointegrating relationships between mortgage defaults, property prices and bank lending in Hong Kong. Our findings reveal evidence of cointegrating relationships between bank lending, property prices and mortgage defaults in the long term, which governs the correction mechanism between these variables. These outcomes call for more effort to be devoted to maintaining a balanced relationship between these factors. The essay also finds evidence of short-term dynamics between these variables. Importantly, loan-to-value is found to play the most effective role in curbing mortgage default risk in the portfolios of the Hong Kong banking sector.