Regulating smart cards, electronic banking, and other emerging technologies will not be easy, two researchers warn.

New York University professor Lawrence J. White and University of Houston professor Paul M. Horvitz write that regulation may spur the development of new technologies. For instance, antitrust enforcement encourages innovation by preventing any one firm from dominating the industry.

But regulation also may impede development of new technologies. For instance, regulators may impose a technical standard that is inferior to a competing design.

The researchers urge regulators to take "cautious and measured" steps to regulate new technologies rather than backing off completely or trying to micromanage each innovation.

The study also looked at how banks should approach new payment technologies. The industry faces real threats from Internet providers and other technology companies, which could limit consumer access to bank products. Consumers may even begin to view these technology companies as banks, resulting in an erosion of the banking industry's brand image.

For a copy of "The Challenges of the New Electronic Technologies in Banking: Private Strategies and Public Policy," call 212-998-0880.

The rapid consolidation of the banking industry during the past two decades has not hurt small-business lending, according to a paper by four researchers.

The finding contradicts earlier studies that suggested mergers depress small-business credit.

Alan N. Berger of the Federal Reserve Board, Anthony Saunders and Gregory F. Udell of New York University, and Joseph M. Scalise of Wharton Financial Institutions Center looked at both acquisitions and mergers. Acquisitions-which occur when both institutions retain their charters-had on average no affect on small-business lending. While small-business lending did decline during mergers, which involve the loss of one of the bank's charters, lending by competitors increased.

For a copy of "The Effects of Mergers and Acquisitions on Small-Business Lending," call 202-452-2903.

Banks may be spending too much money for high technology equipment and not enough on the people who run the systems, according to researchers at the Wharton Financial Institutions Center.

Baba Prasad and Patrick T. Harker reviewed information technology spending by 115 retail banks. Capital spending on computers did little to improve productivity, they find. But hiring computer experts allowed banks to boost productivity significantly.

For a copy of "Examining the Contribution of Information Technology Toward Productivity and Profitability in U.S. Retail Bankng," call 215-573- 5838.

Despite recent criticism, the consumer price index is the best measure of inflation available, Federal Reserve Bank of New York economist Charles Steindel writes.

Competing indexes have significant problems, he finds. Measurements tied to Gross Domestic Product include many "one-of-a-kind products" that are difficult to accurately price. Changes in personal consumption require numerous revisions, making the initial numbers highly suspect.

For a copy of "Are There Good Alternatives to the CPI," call 212-720- 6134.

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