nep-cmp New Economics Papers
on Computational Economics
Issue of 2008‒06‒27
four papers chosen by
Stan Miles
Thompson Rivers University

  1. Welfare impact of external balance in pakistan: CGE-microsimulation analysis By Ahmed, Vaqar; O' Donoghue, Cathal
  2. Educational Attainment, Growth and Poverty Reduction within the MDG Framework: Simulations and Costing for the Peruvian Case By Gustavo Yamada; Juan F. Castro; Arlette Beltran; Maria A. Cardenas
  3. A Comparison of Results From MRIO and Interregional Computable General Equilibrium (CGE) Analyses of the Impacts of a Positive Demand Shock on the ‘CO2 Trade Balance’ Between Scotland and the Rest of the UK By Michelle Gilmartin; Kim Swales; Karen Turner
  4. How to Maximize the Likelihood Function for a DSGE Model By Martin Møller Andreasen

  1. By: Ahmed, Vaqar; O' Donoghue, Cathal
    Abstract: This paper studies the welfare impact of changes in the external balance of a developing economy (Pakistan). We explain that the economic growth achieved during the past decade is highly dependent on the improvements in external balance. After 2001, Pakistan has benefited from, an increase in the inflow of remittances, foreign assistance from bilateral and multilateral sources, and a relatively stable exchange rate. This was complimented by growth in the real sector. The GDP grew at an average of 7 percent from 2002 to 2007. During the same time period the growth in per-capita income was around 13 percent in dollar terms. This performance however has come under pressure due to the rising inflation, slowing down of global economy and external price shocks. The increase in import price of petroleum, raw materials and other manufactured goods has the potential of reducing the growth performance, impacting the competitiveness of the economy and thereby threatening the gains achieved during the past seven years in reducing the poverty levels. We study using a CGE-microsimulation model the effects of changes in import prices faced by Pakistan. Also provided in the simulation exercise is an analysis of increase in foreign savings that are usually prescribed for developing economies in order to augment the domestic savings and channelling investment towards developments in infrastructure and social sectors.
    Keywords: Computable General Equilibrium Model; Microsimulation; Balance of Payments; Economic Growth; Poverty; Inequality; Pakistan
    JEL: D58 C01
    Date: 2008–06–01
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:9267&r=cmp
  2. By: Gustavo Yamada; Juan F. Castro; Arlette Beltran; Maria A. Cardenas
    Abstract: We propose a model that accounts for the potential feedback between schooling performance, human capital accumulation and long run GDP growth, and links these results with poverty incidence. Our simulation exercise takes into account targets for education indicators and GDP growth itself (as arguments in our planner's loss function) and provides two conclusions: (i) with additional funds which amount to 1 percent of GDP each year, public intervention could, by year 2015, add an extra 0.89 and 1.80 percentage points in terms of long-run GDP growth and permanent reduction in poverty incidence, respectively; and (ii) in order to engineer an intervention in the educational sector so as to transfer households the necessary assets to attain a larger income generation potential in the long run, we need to extend the original set of MDG indicators to account for access to higher educational levels besides primary education.
    Keywords: Millennium development goals, education, human capital, GDP growth, poverty, Peru
    JEL: O41 I32 C25 C41 C61
    Date: 2008
    URL: http://d.repec.org/n?u=RePEc:lvl:mpiacr:2008-05&r=cmp
  3. By: Michelle Gilmartin (Department of Economics, University of Strathclyde); Kim Swales (Department of Economics, University of Strathclyde); Karen Turner (Department of Economics, University of Strathclyde)
    Abstract: In previous work we have applied the environmental multi-region input-output (MRIO) method proposed by Turner et al (2007) to examine the ‘CO2 trade balance’ between Scotland and the Rest of the UK. In McGregor et al (2008) we construct an interregional economy-environment input-output (IO) and social accounting matrix (SAM) framework that allows us to investigate methods of attributing responsibility for pollution generation in the UK at the regional level. This facilitates analysis of the nature and significance of environmental spillovers and the existence of an environmental ‘trade balance’ between regions. While the existence of significant data problems mean that the quantitative results of this study should be regarded as provisional, we argue that the use of such a framework allows us to begin to consider questions such as the extent to which a devolved authority like the Scottish Parliament can and should be responsible for contributing to national targets for reductions in emissions levels (e.g. the UK commitment to the Kyoto Protocol) when it is limited in the way it can control emissions, particularly with respect to changes in demand elsewhere in the UK. However, while such analysis is useful in terms of accounting for pollution flows in the single time period that the accounts relate to, it is limited when the focus is on modelling the impacts of any marginal change in activity. This is because a conventional demand-driven IO model assumes an entirely passive supply-side in the economy (i.e. all supply is infinitely elastic) and is further restricted by the assumption of universal Leontief (fixed proportions) technology implied by the use of the A and multiplier matrices. In this paper we argue that where analysis of marginal changes in activity is required, a more flexible interregional computable general equilibrium approach that models behavioural relationships in a more realistic and theory-consistent manner, is more appropriate and informative. To illustrate our analysis, we compare the results of introducing a positive demand stimulus in the UK economy using both IO and CGE interregional models of Scotland and the rest of the UK. In the case of the latter, we demonstrate how more theory consistent modelling of both demand and supply side behaviour at the regional and national levels affect model results, including the impact on the interregional CO2 ‘trade balance’.
    Keywords: CGE modelling, MRIO, CO2 trade balance, environmental responsibility
    JEL: D57 D58 R15 Q56
    Date: 2008–06
    URL: http://d.repec.org/n?u=RePEc:str:wpaper:0807&r=cmp
  4. By: Martin Møller Andreasen (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: This paper extends two optimization routines to deal with objective functions for DSGE models. The optimization routines are i) a version of Simulated Annealing developed by Corana, Marchesi & Ridella (1987), and ii) the evolutionary algorithm CMA-ES developed by Hansen, Müller & Koumoutsakos (2003). Following these extensions, we examine the ability of the two routines to maximize the likelihood function for a sequence of test economies. Our results show that the CMA- ES routine clearly outperforms Simulated Annealing in its ability to find the global optimum and in efficiency. With 10 unknown structural parameters in the likelihood function, the CMA-ES routine finds the global optimum in 95% of our test economies compared to 89% for Simulated Annealing. When the number of unknown structural parameters in the likelihood function increases to 20 and 35, then the CMA-ES routine finds the global optimum in 85% and 71% of our test economies, respectively. The corresponding numbers for Simulated Annealing are 70% and 0%.
    Keywords: CMA-ES optimization routine, Multimodel objective function, Nelder-Mead simplex routine, Non-convex search space, Resampling, Simulated Annealing
    JEL: C61 C88 E30
    Date: 2008–06–19
    URL: http://d.repec.org/n?u=RePEc:aah:create:2008-32&r=cmp

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