nep-cmp New Economics Papers
on Computational Economics
Issue of 2005‒08‒13
nine papers chosen by
Stan Miles
York University

  1. Monte Carlo Simulations for Real Estate Valuation By Martin Hoesli; Elion Jani; André Bender
  2. Efficient Posterior Simulation for Cointegrated Models with Priors On the Cointegration Space By Gary Koop; Roberto León-González; Rodney W. Strachan
  3. Dynamic Programming: An Introduction by Example By Joachim Zietz
  4. Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria By Rainer Niemann; Corinna Treisch
  5. Pitfalls in the Use of Ad valorem Equivalent Representations of the Trade Impacts of Domestic Policies By John Whalley
  6. Trade Liberalization in a Joint Spatial Inter-Temporal Trade Model By Hui Huang; John Whalley; Shunming Zhang
  7. Parameterized Expectations Algorithm and the Moving Bounds: a comment on convergence properties By Javier J. Pérez; A. Jesús Sánchez
  8. Horizontal and Vertical Redistribution and Micro-simulation. By Luc Savard; Stéphane Mussard
  9. Micro-simulation and Multi-decomposition: A Case Study: Philippines. By Luc Savard; Stéphane Mussard

  1. By: Martin Hoesli; Elion Jani; André Bender
    Abstract: We use the Adjusted Present Value (APV) method with Monte Carlo simulations for real estate valuation purposes. Monte Carlo simulations make it possible to incorporate the uncertainty of valuation parameters, in particular of future cash flows, of discount rates and of terminal values. We use empirical data to extract information about the probability distributions of the various parameters and suggest a simple model to compute the discount rate. We forecast the term structure of interest rates using a Cox et al. (1985) model, and then add a premium that is related to both the real estate market and selected property-specific characteristics. Our empirical results suggest that the central values of our simulations are in most cases slightly less than the hedonic values. The confidence intervals are found to be most sensitive to the long-term equilibrium interest rate being used and to the expected growth rate of the terminal value.
    Keywords: Real estate valuation; Monte Carlo simulations; Adjusted Present Value (APV)
    JEL: R32 G12 G23
    Date: 2005–06
  2. By: Gary Koop; Roberto León-González; Rodney W. Strachan
    Abstract: A message coming out of the recent Bayesian literature on cointegration is that it is important to elicit a prior on the space spanned by the cointegrating vectors (as opposed to a particular identified choice for these vectors). In this note, we discuss a sensible way of eliciting such a prior. Furthermore, we develop a collapsed Gibbs sampling algorithm to carry out efficient posterior simulation in cointegration models. The computational advantages of our algorithm are most pronounced with our model, since the form of our prior precludes simple posterior simulation using conventional methods (e.g. a Gibbs sampler involves non-standard posterior conditionals). However, the theory we draw upon implies our algorithm will be more efficient even than the posterior simulation methods which are used with identified versions of cointegration models.
    Date: 2005–07
  3. By: Joachim Zietz
    Abstract: Some basic dynamic programming techniques are introduced by way of example with the help of the computer algebra system Maple. The emphasis is on building confidence and intuition for the solution of dynamic problems in economics. To better integrate the material, the same examples are used to introduce different techniques. One covers the optimal extraction of a natural resource, another consumer utility maximization, and the final example solves a simple real business cycle model. Every example is accompanied by Maple computer code to make replication and extension easy.
    Keywords: Dynamic Programming; Computer-Aided Solutions; Learning by Example
    JEL: C61 A23
    Date: 2004–09
  4. By: Rainer Niemann; Corinna Treisch
    Abstract: In 2005, Austria modified its group taxation regime and now provides an option for cross-border loss-offset. We analyse the combined impact of Austria's new group taxation and loss-offset limitations on cross-border investment decisions of domestic corporations. Monte Carlo simulations in an inter-temporal setting reveal that the impact on foreign real investment induced by the new group taxation is ambiguous. Whereas marginal investment projects with decreasing cash flows tend to benefit from group taxation, innovative projects with initial losses and increasing cash flows may be discriminated against. Investors should consider domestic income and repatriation policy simultaneously before opting for group taxation.
    Keywords: group taxation, investment decisions, Monte Carlo simulations, international taxation, loss-offset rules
    JEL: G31 H25
    Date: 2005
  5. By: John Whalley
    Abstract: Numerical simulation exercises to analyze the impacts of potential changes in non-tariff policies commonly use ad valorem equivalent tariff treatment even though estimated impacts using explicit model representation and ad valorem equivalent treatments will differ. The difficulty for modellers is that the detail and subtlety embodied in a wide array of policy interventions means that some simplification is appealing, but no meaningful general propositions exist in the theoretical literature as to the sign or size of the differences in predicted effects. All that can seemingly be done is to investigate the differences case by case, but even here the findings are sensitive both to the particular form of model used as well as the model parameterization employed. As a result, there is relatively little in the literature that provides guidance as to how serious the pitfalls may be, and how misleading ad valorem tariff equivalent treatment is. Here I draw on three examples of numerical modelling where explicit representation of policy interventions are used. The picture that emerges is one of large quantitative and even qualitative differences in predicted impacts. These examples suggest that where interventions differ from a tariff, ad valorem representation should be undertaken in numerical trade modelling only with substantial caveats.
    JEL: F00 F02 F10 F15
    Date: 2005
  6. By: Hui Huang; John Whalley; Shunming Zhang
    Abstract: This paper considers liberalization of trade in both inter-temporal intermediation services and goods in a joint spatial-inter-temporal trade model. Joint multi-commodity spatial intertemporal models are not (to our knowledge) used in the trade literature as general comparative statics results are unavailable and (in the presence of incomplete markets) existence can also be an issue. Here we use numerical simulation methods. We first consider world with service trade autarky in which there is no domestic intermediation service provision, and service trade liberalization involves costless inter-temporal intermediation provided by foreign service providers. This simple treatment allows us to model service trade liberalization as removing period by period budget constraints for domestic consumers. In such a world, if nonzero tariffs apply to spatial trade we present an example showing how service trade liberalization can be welfare worsening. One implication is that negotiations on services in the WTO General Agreement on Trade in Services (GATS) need not be welfare improving if there are also ongoing tariff negotiations. We then expand the model to capture a more complex world where costly intermediation services can be provided by both within-country and foreign providers. We again illustrate how services liberalization can be welfare worsening. We finally discuss whether welfare worsening service trade liberalization is likely in a real-world situation of highly restricted services trade and considerably more open goods trade, and when services trade are around 1/3 of total goods and services trade as is often claimed from available global service trade data.
    JEL: F00 F11
    Date: 2005
  7. By: Javier J. Pérez (Centro de Estudios Andaluces); A. Jesús Sánchez (Centro de Estudios Andaluces)
    Abstract: In this paper we analyze the convergence properties of the moving bounds algorithm to initialize the Parameterized Expectations Algorithm suggested by Maliar and Maliar (2003) [Journal of Business and Economic Statistics 1, pp. 88-92]. We carry out a Monte Carlo experiment to check its performance against some initialization alternatives based on homotopy principles. We do so within the framework of two standard neoclassical growth models. We show that: (i) speed of convergence is poor as compared to alternatives; (ii) starting from a not very accurate initial guess might prevent convergence in relatively simple models. The results suggest the need to fine tune Maliar and Maliar's method to improve its convergence properties.
    Keywords: Nonlinear models; Numerical solution methods; Parameterized Expectations algorithm; Optimal growth
    JEL: C63 E17
    Date: 2005
  8. By: Luc Savard (GREDI, Département d'économique, Université de Sherbrooke); Stéphane Mussard (GREDI, Université de Sherbrooke and Université de Perpignan)
    Abstract: This paper proposes many indicators of vertical and horizontal redistribution throughout a generalized technique of Gini decomposition. Using the TD/BU micro-simulation models with externalities, we simulate income distributions and income source distributions for seven educational groups in Philippines in order to measure the inequality variations between two periods (pre and post policy simulation). We generalize the technique of multi-decomposition, that is, the combination of income source and subgroup decomposition to capture the different indicators of vertical and horizontal redistribution.
    Keywords: Income Inequalities, Micro-simulation, Generalized Multi-decomposition.
    JEL: D63 D31
    Date: 2005
  9. By: Luc Savard (GREDI, Département d'économique, Université de Sherbrooke); Stéphane Mussard (GREDI, Université de Sherbrooke and Université de Perpignan G1K 7P4)
    Abstract: This article combines computable general equilibrium (CGE) micro-simulation modeling and the Gini multi-decomposition analysis. The CGE-micro-simulation approach enables one to generate endogenous income distributions following government policy interventions. The introduction of these endogenous distributions into the Gini multi-decomposition, that merges income source and subgroup decompositions, provides powerful information to decision makers, which analyze the trade-off between inequality and efficiency whereas Gini multi-decomposition is usually applied in a partial equilibrium context. This is done by imposing the assumption that either the income or the price effects are exogenous.
    Keywords: , Micro-simulation, Multi-decomposition, Philippines.
    JEL: D63 D31
    Date: 2005

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