nep-cmp New Economics Papers
on Computational Economics
Issue of 2006‒05‒27
seven papers chosen by
Stan Miles
York University

  1. The Stability of Electricity Prices: Estimation and Inference of the Lyapunov Exponent By Mikael Bask; Tung Liu; Anna Widerberg
  2. Classification of Human Decision Behavior: Finding Modular Decision Rules with Genetic Algorithms By Franz Rothlauf; Daniel Schunk; Jella Pfeiffer
  3. Improving Tatonnement Methods of Solving Heterogeneous Agent Models By Alexander Ludwig
  4. Portfolio management implications of volatility shifts: Evidence from simulated data By Viviana Fernandez; Brian M. Lucey
  5. The sequence-dependent assembly line balancing problem By Armin Scholl; Nils Boysen; Malte Fliedner
  6. Disparities in Pension Financing in Europe: Economic and Financial Consequences By Jean Chateau; Xavier Chojnicki
  7. Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model By Axel Börsch-Supan; Alexander Ludwig; Joachim Winter

  1. By: Mikael Bask (Monetary Policy and Research Department, Bank of Finland,); Tung Liu (Department of Economics, Ball State University); Anna Widerberg (Department of Economics,)
    Abstract: The aim of this paper is to illustrate how the stability of a stochastic dynamic system is measured using the Lyapunov exponents. Specifically, we use a feedforward neural network to estimate these exponents as well as asymptotic results for this estimator to test for unstable (chaotic) dynamics. The data set used is spot electricity prices from the Nordic power exchange market, Nord Pool, and the dynamic system that generates these prices appears to be chaotic in one case.
    Keywords: Feedforward Neural Network; Nord Pool; Lyapunov Exponents; Spot Electricity Prices; Stochastic Dynamic System
    JEL: C12 C14 C22
    Date: 2006–04
  2. By: Franz Rothlauf; Daniel Schunk; Jella Pfeiffer (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: The understanding of human behavior in sequential decision tasks is im- portant for economics and socio-psychological sciences. In search tasks, for example when individuals search for the best price of a product, they are confronted in sequential steps with di®erent situations and they have to decide whether to continue or stop searching. The decision behavior of individuals in such search tasks is described by a search strategy. This paper presents a new approach of ¯nding high-quality search strategies by using genetic algorithms (GAs). Only the structure of the search strategies and the basic building blocks (price thresholds and price patterns) that can be used for the search strategies are pre-speci¯ed. It is the purpose of the GA to construct search strategies that well describe human search behavior. The search strategies found by the GA are able to predict human behavior in search tasks better than traditional search strategies from the literature which are usually based on theoretical as- sumptions about human behavior in search tasks. Furthermore, the found search strategies are reasonable in the sense that they can be well in- terpreted, and generally that means they describe the search behavior of a larger group of individuals and allow some kind of categorization and classi¯cation. The results of this study open a new perspective for future research in developing behavioral strategies. Instead of deriving search strategies from theoretical assumptions about human behavior, researchers can directly analyze human behavior in search tasks and ¯nd appropriate and high- quality search strategies. These can be used for gaining new insights into the motivation behind human search and for developing new theoretical models about human search behavior.
    Date: 2005–06–21
  3. By: Alexander Ludwig (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: This paper modifies standard block Gauss-Seidel iterations used by tatonnement methods for solving large scale deterministic heterogeneous agent models. The composite method between first- and second-order tatonnement methods is shown to considerably improve convergence both in terms of speed as well as robustness relative to conventional first-order tatonnement methods. In addition, the relative advantage of the modified algorithm increases in the size and complexity of the economic model. Therefore, the algorithm allows significant reductions in computational time when solving large models. The algorithm is particularly attractive since it is easy to implement - it only augments conventional and intuitive tatonnement iterations with standard numerical methods.
    JEL: C63 C68 E13
    Date: 2004–09–10
  4. By: Viviana Fernandez; Brian M. Lucey
    Abstract: Based on weekly data of the Dow Jones Country Titans, the CBT-municipal bond, spot and futures prices of commodities for the period 1992-2005, we analyze the implications for portfolio management of accounting for conditional heteroskedasticity and structural breaks in long-term volatility. In doing so, we first proceed to utilize the ICSS algorithm to detect volatility shifts, and incorporate that information into PGARCH models fitted to the returns series. At the next stage, we simulate returns series and compute a wavelet-based value at risk, which takes into consideration the investor’s time horizon. We repeat the same procedure for artificial data generated from distribution functions fitted to the returns by a semi-parametric procedure, which accounts for fat tails. Our estimation results show that neglecting GARCH effects and volatility shifts may lead us to overestimate financial risk at different time horizons. In addition, we conclude that investors benefit from holding commodities as their low or even negative correlation with stock indices contribute to portfolio diversification.
    Keywords: volatility shifts, wavelets, value at risk
    Date: 2006–05–23
  5. By: Armin Scholl (University of Jena, Faculty of Economics); Nils Boysen (University of Hamburg, Faculty of Economics and Social Science); Malte Fliedner (University of Hamburg, Faculty of Economics and Social Science)
    Abstract: The sequence-dependent assembly line balancing problem Abstract Assembly line balancing problems (ALBP) arise whenever an assembly line is configured, redesigned or adjusted. An ALBP consists of distributing the total workload for manufacturing any unit of the products to be assembled among the work stations along the line. The sequence-dependent assembly line balancing problem (SDALBP) is an extension of the standard simple assembly line balancing problem (SALBP) which has significant relevance in realworld assembly line settings. SDALBP extends the basic problem by considering sequencedependent task times. In this paper, we define this new problem, formulate several versions of a mixed-integer program, adapt solution approaches for SALBP to SDALBP, generate test data and perform some preliminary computational experiments. As a main result, we find that applying SALBP-based search procedures is very effective, whereas modeling and solving the problem with MIP standard software is not recommendable.
    Keywords: Assembly line balancing, Mass-production, Combinatorial optimization, Sequencing
    Date: 2006–05–23
  6. By: Jean Chateau; Xavier Chojnicki
    Abstract: We present a quantitative analysis of the impact of differential ageing and pension reforms on capital and labour market and, in particular, on intra-European capital flows. To this end, we develop a stylized general equilibrium model with overlapping generations of heterogeneous agents for the three largest European countries: France, Germany and the United-Kingdom. The model presents a structure halfway between pure general equilibrium models with rigorous microeconomic foundations accounting models where the macroeconomic environment remains exogenous. We show that the dynamics of capital accumulation and pension system sustainability are totally different depending on the assumption concerning economic openness. Two main conclusions may be drawn from the examination of the various prospective scenarios. First of all, the critical assumptions for PAYG systems are the future trend of the global factor productivity and the behavior of agents concerning activity and labour market participation. Secondly, in the long run, resorting to debt financing seems to be a dead end to finance retirement systems.
    Keywords: Public pensions; ageing; computable general equilibrium model
    JEL: H55 J1 C68
    Date: 2006–05
  7. By: Axel Börsch-Supan; Alexander Ludwig; Joachim Winter (Mannheim Research Institute for the Economics of Aging (MEA))
    JEL: E27 F21 G15 H55 J11
    Date: 2004–11–11

This nep-cmp issue is ©2006 by Stan Miles. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.