nep-cmp New Economics Papers
on Computational Economics
Issue of 2007‒02‒24
six papers chosen by
Stan Miles
Thompson Rivers University

  1. Predicting Sovereign Debt Crises Using Artificial Neural Networks: A Comparative Approach By Marco Fioramanti
  2. Genetic algorithm estimation of interest rate term structure By Ricardo Gimeno; Juan M. Nave
  3. Global Trade Models and Economic Policy Analyses: Relevance, Risks and Repercussions for Africa By Ben Hammouda, Hakim; Osakwe, Patrick N.
  4. Poverty and inequality effects of a high growth scenario in South Africa: A dynamic microsimulation CGE analysis By Ramos Mabugu; Margaret Chitiga
  5. Trade in Business Services in General Equilibrium By Markusen, James R.; Strand, Bridget
  6. Economic and Poverty Impacts of a Voluntary Carbon Reduction for a Small Liberalized Developing Economy: The Case of the Philippines By Erwin L. Corong

  1. By: Marco Fioramanti (ISAE - Institute for Studies and Economic Analyses; University of Pescara, Faculty of Economics)
    Abstract: Recent episodes of financial crises have revived the interest in developing models that are able to timely signal their occurrence. The literature has developed both parametric and non parametric models to predict these crises, the so called Early Warning Systems. Using data related to sovereign debt crises occurred in developing countries from 1980 to 2004, this paper shows that a further progress can be done applying a less developed non-parametric method, i.e. Artificial Neural Networks (ANN). Thanks to the high flexibility of neural networks and to the Universal Approximation Theorem an ANN based early warning system can, under certain conditions, outperform more consolidated methods.
    Keywords: Early Warning System; Financial Crisis; Sovereign Debt Crises; Artificial Neural Network.
    JEL: F34 F37 C45 C14
    Date: 2006–10
  2. By: Ricardo Gimeno (Banco de España); Juan M. Nave (Universidad CEU Cardenal Herrera)
    Abstract: The term structure of interest rates is an instrument that gives us the necessary information for valuing deterministic financial cash flows, measuring the economic market expectations and testing the effectiveness of monetary policy decisions. However, it is not directly observable and needs to be measured by smoothing data obtained from asset prices through statistical techniques. Adjusting parsimonious functional forms - as proposed by Nelson and Siegel (1987) and Svensson (1994) - is the most popular technique. This method is based on bond yields to maturity and the high degree of non linearity of the functions to be optimised make it very sensitive to the initial values employed. In this context, this paper proposes the use of genetic algorithms to find these values and reduce the risk of false convergence, showing that stable time series parameters are obtained without the need to impose any kind of restrictions.
    Keywords: forward and spot interest rates, nelson and siegel model, non-linear optimization, numerical methods, svensson model, yield curve estimation
    JEL: G12 C51 C63
    Date: 2006–12
  3. By: Ben Hammouda, Hakim; Osakwe, Patrick N.
    Abstract: Computable general equilibrium (CGE) models are widely used for trade policy analyses and recommendations. Simulation results from these models have also been used as a basis for offering advice to African countries on what positions to take in multilateral trade negotiations. There is however increasing discomfort with the use of these models for policy recommendations, especially in Africa. In this paper we compare the results of several CGE studies that examined the impact of potential Doha Round reforms on Africa and demonstrate that the results differ drastically both in terms of magnitude and direction. Part of the discrepancies in results can be explained by differences in database, model structure, and choice of parameters. Others are, however, difficult to explain because several studies either do not report key assumptions made or do not provide a clear description of how their framework differs from those in the literature. We also show that the modelling approach and the database used in most CGE studies do not take account of key features of African economies that have serious implications for the impact of trade reforms on Africa. Finally, we outline potential consequences of the misuse of CGE models for policy evaluation and suggest pitfalls to avoid if CGE model results are to be taken seriously by policy makers in Africa.
    Keywords: Trade Reforms; CGE Models; Doha Round; Africa
    JEL: F15 F13 F11
    Date: 2006–12
  4. By: Ramos Mabugu (Financial and Fiscal Commission, South Africa); Margaret Chitiga (Department of Economics, University of Pretoria)
    Abstract: The debate about the consequences of economic growth on poverty and welfare was recently rekindled in South Africa by announcements that the government would be targeting a sustainable growth rate of 6 percent per annum under the Accelerated and Shared Growth Initiative for South Africa (ASGISA). This paper uses a sequential dynamic computable general equilibrium model linked to a nationally representative household survey to assess the poverty and economic consequences of a higher economic growth scenario. The main findings are that higher economic growth induces reductions in poverty both in the short and long run. It enhances capital accumulation, particularly in the agriculture and textiles sectors. An interesting observation is that the Mining industry benefits the least from a high economic growth scenario. However, this is not related to domestic savings/investment. Mining is strongly dependent on foreign investments and the industry return to capital is less profitable to domestic institutions, particularly households and this is what explains the lower benefits to the sector. African and Coloured households reap most of the benefits, with greater gains among urban unskilled dwellers. These findings suggest that lifting of growth constraints rather than macroeconomic stimulation would induce higher growth with the resulting beneficial effects. Economic growth of the levels simulated does not appear to be inconsistent with macroeconomic balance, as reflected in price stability, balance of payments and sectoral effects.
    Keywords: Sequential dynamic CGE, microsimulation, ASGISA, poverty, welfare, growth, South Africa
    JEL: D58 E27 F17 I32 O15 O55
    Date: 2007
  5. By: Markusen, James R.; Strand, Bridget
    Abstract: Trade in business services has been attracting attention from academic researchers, policy makers, and business journalists. While there are many anecdotes, there has been little in the way of formal theory applied to this issue. In this paper, we adapt a general model of fragmentation of production activities to try to capture the specific features of business services. Following a general discussion, we calibrate a numerical general-equilibrium simulation model to a situation in which both trade and foreign investment in services are initially banned to technically infeasible. We then compute three counter-factual scenarios: one in which trade but not investment in services is feasible or allowed, one in which investment but not trade is allowed, and one in which both trade and investment in services are allowed.
    Keywords: business services; foreign investment in services; fragmentation; offshoring; outsourcing; trade in services
    JEL: F0 F23
    Date: 2007–02
  6. By: Erwin L. Corong (De La Salle University-Manila)
    Abstract: This paper analyzes the economic and poverty effects of a voluntary carbon emission reduction for a small liberalized economy—the Philippines. The simulation results indicate that tariff reductions undertaken by the Philippine government between 1994 and 2005 reduced the cost of fossil fuels thereby resulting in an increase in carbon emissions. The economic cost of reducing carbon emissions by imposing a carbon tax appears minimal as the reduction in consumer prices due to tariff reductions outweigh the increase in production cost from the imposition of a carbon tax. Overall results suggest that maintaining carbon emissions relative to 1994 levels appears to be a sensible alternative for the country
    Keywords: Climate Change, Carbon Emissions, International Trade, Computable General Equilibrium, Micro-Simulation, Macro-Micro Models, Philippines
    JEL: C68 D58 F18 I39 Q56
    Date: 2007–01

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