nep-cmp New Economics Papers
on Computational Economics
Issue of 2008‒03‒01
ten papers chosen by
Stan Miles
Thompson Rivers University

  1. Waiting Times in Simulated Stock Markets By Cappellini, Alessandro; Ferraris, Gianluigi
  2. How does Vietnam ' s accession to the World Trade Organization change the spatial incidence of poverty? By Roland-Holst, David; Fujii, Tomoki
  3. Assessment of income distribution and a hypothetical flat tax reform in Hungary By Lelkes, Orsolya; Benedek, Dora
  4. Policy Challenges of Population Aging in Ireland By Dennis P. J. Botman; Dora M. Iakova
  5. Population ageing and public pension reforms in a small open economy. By Christiane Nickel; Philipp Rother; Angeliki Theophilopoulou
  6. Endogenous animal spirits and investment an agent-based model By Fontana Magda; Marchionatti Roberto
  7. National Productive Structure and Innovative Dynamics: Finding the (Endogenous) Path to Convergence By Jorge Cerdeira; Luís Pina Rebelo
  8. Agricultural adaptation to climate policies under technical change By Uwe A. Schneider; Michael Obersteiner; Erwin Schmid; Bruce A. McCarl
  9. Crop-Based Biofuel Production under Acreage Constraints and Uncertainty By Mindy L. Baker; Dermot J. Hayes; Bruce A. Babcock
  10. Market power and merger simulation in retail banking By Molnár, József

  1. By: Cappellini, Alessandro; Ferraris, Gianluigi
    Abstract: Exploiting a precise reproduction of a stock exchange, the robustness of the Continuous Double Auction (CDA) mechanism, evaluated by means of the waiting time distributions, has been proved versus 36 different set ups made by varying both the operators' behaviour and the market micro structure. The obtained results demonstrate that the CDA remains able to clear strongly different order flows, though the Milan stock exchange seemed to be a little more efficient than the NYSE under the allocative point of view, witnessing the intrinsic complexity of the stock market. The simulation has been built as an Agent Based Model in order to obtain a plausible order flow. The decisions of single agents and their interaction through the market book are realistic and reproduce some empirical analysis results. The mentioned results have been obtained either by the analysis of the complete pending time series and the same computation of the asks and bids series alone.
    Keywords: Waiting times; Agent Based Modeling; Stock Market; Micro structures; Market Architectures
    JEL: D53 C15
    Date: 2007–12
  2. By: Roland-Holst, David; Fujii, Tomoki
    Abstract: Trade policies can promote aggregate efficiency, but the ensuing structural adjustments generally create both winners and losers. From an incomes perspective, trade liberalization can raise gross domestic product per capita, but rates of emergence from poverty depend on individual household characteristics of economic participation and asset holding. To fully realize the growth potential of trade, while limiting the risk of rising inequality, policies need to better account for microeconomic heterogeneity. One approach to this is geographic targeting that shifts resources to poor areas. This study combines an integrated microsimulation-computable general equilibrium model with small area estimation to evaluate the spatial incidence of Vietnam ' s accession to the World Trade Organization. Provincial-level poverty reduction after full liberalization was heterogeneous, ranging from 2.2 percent to 14.3 percent. Full liberalization will benefit the poor on a national basis, but the northwestern area of Vietnam is likely to lag behind. Furthermore, poverty can be shown to increase under comparable scenarios.
    Keywords: Rural Poverty Reduction,Population Policies,Economic Theory & Research,Achieving Shared Growth
    Date: 2008–02–01
  3. By: Lelkes, Orsolya; Benedek, Dora
    Abstract: The paper presents evidence on the effects of taxes and benefits on household incomes in Hungary referring to the 2006 system and a hypothetical flat tax reform. For this, a microsimulation model is used, which is based on a matched sample of an income and a consumption survey and administrative tax records. The Hungarian budget receives more revenues from VAT than from PIT. This has major implications on equity, as while PIT is progressive, VAT is regressive, imposing a higher tax burden on low-income households. We highlight the importance of tax allowances. The absolute amount of total tax allowances tends to increase with income, and the share of allowances within total incomes is around 5-7% in all income groups, except the top fifth, where it declines. Targeting is thus inadequate, and it is especially so in case of child support. Family tax allowance reaches the bottom decile only to a limited extent. This is in sharp contrast with the universal child benefit, which is well targeted to the poorest. The second part explores the likely impact of the introduction of a flat tax, where VAT and PIT rates are set at 20%, and a tax free bracket for low incomes is kept. We show that a budget neutral solution would have a largely regressive effect, where 70% of the population would lose, with a minority on the top of the distribution gaining.
    Keywords: Tax-benefit microsimulation; redistribution; flat tax reform; Hungary
    JEL: D31 I38 C80
    Date: 2007–07–15
  4. By: Dennis P. J. Botman; Dora M. Iakova
    Abstract: The projected rise in age-related government spending as a share of GDP in Ireland over the next forty years is among the highest in the euro area. In the absence of reforms, public debt will increase to unsustainable levels. This paper uses the IMF's Global Fiscal Model to compare the macroeconomic effects of different fiscal strategies to accommodate the rise in age-related spending. The simulations suggest that adopting a package of measures, including an increase in the retirement age, broadening the tax base, and raising indirect taxes, would be a more growth-friendly strategy than relying exclusively on raising the social security contribution rate.
    Keywords: Working Paper , Pension regulations , Ireland , Aging , Government expenditures , Public debt , Fiscal policy , Tax bases , Economic models ,
    Date: 2007–10–29
  5. By: Christiane Nickel (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Philipp Rother (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Angeliki Theophilopoulou (University of London, Birkbeck College, School of Economics, Mathematics and Statistics, Malet Street, WC1E 7HX London, UK.)
    Abstract: This paper aims to address the issue of public pension reforms under demographic ageing that is likely to occur in Europe over the next 50 years. Three possible scenarios are analysed in a Blanchard OLG framework. These include: i) a decrease both in public pensions and the lump sum labour income tax, ii) a decrease both in public pensions and the distortionary corporate tax, iii) an increase in the retirement age. The analysis focuses on the effects of these fiscal policies on key economic variables such as consumption, private and public debt, output and wages. Quantitative experiments assess the impact of different fiscal policies in terms of public debt sustainability but most importantly suggest policies that smooth the transition of the economy to the new equilibrium. The main results suggest that the adverse effects of pension reforms on consumption are moderated when they are accompanied by appropriate taxation policies. In particular, when the tax response is rapid most of the adverse movement in consumption is avoided while public and national debt reach lower equilibrium levels. JEL Classification: E6, H3, J1, H55.
    Keywords: Ageing, Pension Reforms, Taxation, Overlapping Generations.
    Date: 2008–02
  6. By: Fontana Magda; Marchionatti Roberto
    Date: 2007–09
  7. By: Jorge Cerdeira (Faculdade de Economia - Universidade do Porto); Luís Pina Rebelo (Faculdade de Economia e Gestão - Universidade Católica Portuguesa (Porto) and Faculdade de Economia - Universidade do Porto)
    Abstract: We extend the model presented in Barro and Sala-i-Martin (1997) by allowing for two types of economies - more developed and in transition to European Union integration - to both imitate and innovate varieties of intermediate goods. Besides depending on research and development expenditures, we also allow for the stochastic nature of innovation by making it also dependent on a random component. We do this by Monte Carlo simulation, using a Box-Muller process, and solve a three differential equation model by using numerical methods. Two situations are presented: a leading economy with greater institutions and more labour than the transition economy versus a situation where an institutional advance is given to the transition economy.
    Keywords: stochastic innovation; transition economies; growth; technology; diffusion; convergence
    JEL: O40 O30 O11
    Date: 2008–02
  8. By: Uwe A. Schneider; Michael Obersteiner; Erwin Schmid; Bruce A. McCarl (Research unit Sustainability and Global Change, Hamburg)
    Abstract: This study uses a partial equilibrium model of the US agricultural sector to examine how technical progress and carbon price levels affect land management adaptation. We find that the climate policy range, over which a more extensive agriculture is preferred, decreases as crop yields increase. Second, technical progress with traditional crops offers less mitigation benefits than progress with mitigation options themselves. Third, while agricultural producers benefit from technical progress on energy crops, they fare worse if technical progress improves traditional crops and low carbon prices.
    Keywords: Technical Change, Producer Adaptation, Agricultural Sector Model, Carbon Sequestration, Mathematical Programming, Climate Policy Simulation
    JEL: Q11 Q55 Q58
    Date: 2007–10
  9. By: Mindy L. Baker; Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: A myriad of policy issues and questions revolve around understanding the bioeconomy. To gain insight, we develop a stochastic and dynamic general equilibrium model and capture the uncertain nature of key variables such as crude oil prices and commodity yields. We also incorporate acreage limitations on key feedstocks such as corn, soybeans, and switchgrass. We make standard assumptions that investors are rational and engage in biofuel production only if returns exceed what they can expect to earn from alternative investments. The Energy Independence and Security Act of 2007 mandates the use of 36 billion gallons of biofuels by 2022, with significant requirements for cellulosic biofuel and biodiesel production. We calculate the level of tax credits required to stimulate this level of production. Subsidies of nearly $2.50 per gallon to biodiesel and $1.86 per gallon to cellulosic biofuel were required, and long-run equilibrium commodity prices were high, with corn at $4.76 per bushel and soybeans at $13.01 per bushel. High commodity prices are due to intense competition for planted acres among the commodities.
    Keywords: biodiesel, biofuels, cellulosic, dynamic, ethanol, general equilibrium Monte Carlo, market.
    Date: 2008–02
  10. By: Molnár, József (Bank of Finland Research)
    Abstract: This paper tests market power in the banking industry. Price-cost margins predicted by different oligopoly models are calculated using discrete-choice demand estimates of own-price and cross-price elasticities. These predicted price-cost margins are then compared with price-cost margins computed using observed interest rates and estimates of marginal costs. This paper is among the first to apply this methodology on a detailed, bank-level dataset from the retail banking sector. It extends on previous papers and illustrates the advantages of structural modelling by simulating a counterfactual merger experiment with a number of mergers, each of which involves two major banks, and studying the unilateral effect of the mergers on interest rates. This provides more evidence that concentration measures (such as the Herfindahl index) could be very misleading indicators of market power.
    Keywords: demand; discrete choice; product differentiation; banking; market power; merger simulation
    JEL: G21 L11 L13
    Date: 2008–02–27

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