New Economics Papers
on Computational Economics
Issue of 2008‒10‒07
nine papers chosen by

  1. Neural Networks and their application in the fields of corporate finance By Eric Severin
  2. Economic-Environmental Impact Analysis Based on a Bi-region Interregional I-O Model for Vietnam, between HoChiMinh City (HCMC) and the rest of Vietnam (ROV), 2000 By Bui Trinh; Francisco T. Secretario; Kim Kwangmun; Le Ha Thanh; Pham Huong Giang
  3. Impact of rising rice prices and policy responses in Mali : simulations with a dynamic CGE model By Nouve, Kofi; Wodon, Quentin
  4. Evaluation of the effect of policy regime shifts in Iranian Distributional changes using a Micro Simulation Framework By Khiabani, Nasser; Maziyaki, Ali
  5. Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment By Erling Holmøy and Kyrre Stensnes
  6. Differential Evolution for Multiobjective Portfolio Optimization By Thiemo Krink; Sandra Paterlini
  7. A Belgian flat income tax: effects on labour supply and income distribution By André Decoster; Kris De Swerdt; Kristian Orsini
  8. Government funds and demographic transition – alleviating ageing costs in a small open economy By Kinnunen, Helvi
  9. Governance, corruption, and trade in the Asia Pacific region By Abe, Kazutomo; Wilson, John S.

  1. By: Eric Severin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, SAMOS - Statistique Appliquée et MOdélisation Stochastique - Université Panthéon-Sorbonne - Paris I, CIS - Lab of Computer and Information Science - Helsinki University of Technology)
    Abstract: This article deals with the usefulness of neuronal networks in the area of corporate finance. Firstly, we highlight the initial applications of neural networks. One can distinguish two main types: layer networks and self organizing maps. As Altman al. (1994) underlined, the use of layer networks has improved the reclassifying rate in models of bankruptcy forecasting. These first applications improved bankruptcy forecasting by showing a relationship between capital structure and corporate performance. The results highlighted in our second part, show the pertinence of the use of the algorithm of Kohonen applied to qualitative variables (KACM). More particularly, in line with Altman (1968, 1984), one can suggest the coexistence of negative and positive effects of financial structure on performance. This result allows us to question scoring models and to conclude as to a non-linear relationship. In a larger framework, the methodology of Kohonen has allowed a better perception of the factors able to explain the leasing financing (Cottrell et al., 1996). The objective is here to explain the factors of the choice between leasing and banking loans. By using different variables, we highlight the characteristics of firms which most often use leasing. The corporate financing policy could be explained by: the cost of the financing, advantages of leasing or by the minimization of agency costs in leasing, we highlight a relationship between resorting to leasing and credit rationing.
    Keywords: neural netwoks, SOM, corporate finance
    Date: 2008
  2. By: Bui Trinh (I-O research Consultant, General Statistics Office, Vietnam); Francisco T. Secretario (I-O Research Consultant, Philippines); Kim Kwangmun (Toyohashi University of Technology, Japan); Le Ha Thanh (Hanoi National Economic University, Vietnam); Pham Huong Giang (Hanoi National Economic University, Vietnam)
    Abstract: <p>From time to time, Input - Output model systems have been applied in estimating economic - environment linkages. Further, the economic interregional input output model system can be applied in analysis impacts on residuals generated by interregional economic activities.</p><p>In this paper will processed with case study of HoChiMinh City and Rest of Vietnam based on inter-regional input - output approach.</p><p>The first part of this paper presents the conceptual and accounting framework of the IRIO model in inter-regional economic impact analysis. In this paper, special attention is paid of the Miyazawa system in the decomposition of the economic multiplier effects. For the purpose of this study, the IO model is being extended to be able to measure economic-environmental linkages.</p><p>The second part is a case study for HoChiMinh City based on the 2000 IRIO table. The objective of this study is to measure the inter-regional, inter-industrial interdependencies as well as the consequent environmental effects of pollution emissions due to economic activities. An analysis of the empirical results on the economic-environmental multipliers is shown in the last part of this case study.</p>
    Keywords: Input-Output; Multi-interregional; Vietnam
    Date: 2008
  3. By: Nouve, Kofi; Wodon, Quentin
    Abstract: The increase in the international price of rice is likely to have substantial negative impacts on the poor in countries such as Mali which are net importers of rice. This paper relies on a dynamic CGE model to estimate the likely impact of the recent increase in rice prices on poverty with and without policy responses. Two sets of policy responses are considered: import tax cuts on rice and measures to increase productivity of domestic rice production. The results suggest that an increase in productivity would have a much larger positive impact than a reduction in taxes.
    Keywords: Economic Theory&Research,Markets and Market Access,Food&Beverage Industry,Rural Poverty Reduction,Crops&Crop Management Systems
    Date: 2008–10–01
  4. By: Khiabani, Nasser; Maziyaki, Ali
    Abstract: Improvement in incomes distribution has been one of the major targets of Iranian policy makers; however, during 1991 to 2004, policy regimes have shifted frequently, and evaluation of the effect of policy regime shifts in Iran’s distributional changes due to these policy regime shifts could be illuminating. In this paper, we’ve established a method which computes the effect of policy regime shifts in households’ and individuals’ incomes. This method is based on a micro simulation framework developed by Bourguignon and Ferreira in 2004; moreover, we benefited from work by Heckman on Sample Selection Bias. Finally, we have compared two successive years on each instance of policy shift. Results of micro-simulation show Iranian distributive policies wouldn’t have expected effects to higher and lower deciles of incomes; in other words, government attempts in equalizing incomes haven’t met their aim.
    Keywords: income distribution; micro simulation; Heckman’s method
    JEL: B21 D31 D33 C31
    Date: 2008–09–29
  5. By: Erling Holmøy and Kyrre Stensnes (Statistics Norway)
    Abstract: The Norwegian pension reform of 2006 intends to (1) improve long run fiscal sustainability by reducing the growth in public old-age expenditures, (2) strengthen labour supply incentives, and (3) maintain the main redistributive features of the present system. We assess to what extent the reform is likely to achieve these three goals, using two empirical models iteratively: We combine a detailed dynamic micro simulation of individual benefits and government pension expenditures with a CGE-model, which captures behavioural effects and equilibrium repercussions. We find that the pension reform improves fiscal balances substantially. Compared to a no-reform scenario, the payroll tax rate can be cut by 10 percentage points in 2050. Increased employment contributes more to the fiscal improvement than the reduction in pension expenditures. However, these changes are basically level effects; the reform has a surprisingly small effect on the growth rate of the necessary tax burden starting in 2020. In particular, the growth rate of public pension expenditures is hardly affected. Stronger government finances and higher employment is obtained at the expense of a significant increase income inequality among old age pensioners.
    Keywords: Pension reforms; Fiscal sustainability; Income distribution; Computable general equilibrium model; Dynamic micro simulation
    JEL: H30 H55 H62 H68 O15
    Date: 2008–09
  6. By: Thiemo Krink; Sandra Paterlini
    Abstract: Financial portfolio optimization is a challenging problem. First, the problem is multiobjective (i.e.: minimize risk and maximize profit) and the objective functions are often multimodal and non smooth (e.g.: value at risk). Second, managers have often to face real-world constraints, which are typically non-linear. Hence, conventional optimization techniques, such as quadratic programming, cannot be used. Stochastic search heuristic can be an attractive alternative. In this paper, we propose a new multiobjective algorithm for portfolio optimization: DEMPO - Differential Evolution for Multiobjective Portfolio Optimization. The main advantage of this new algorithm is its generality, i.e., the ability to tackle a portfolio optimization task as it is, without simplifications. Our empirical results show the capability of our approach of obtaining highly accurate results in very reasonable runtime, in comparison with quadratic programming and another state-of-art search heuristic, the so-called NSGA II.
    Keywords: Portfolio Optimization, Multiobjective, Real-world Constraints, Value at Risk, Expected Shortfall, Differential Evolution
    JEL: G11 C61 D81
    Date: 2008–06
  7. By: André Decoster; Kris De Swerdt; Kristian Orsini
    Abstract: The adverse distributional effects of a flat tax are well known and have been documented by empirical research in several countries, including Belgium. Advocates of the flat tax argue, correctly, that these studies do not take into account agents’ behavioural reactions and possible feed back effects. One of the important effects in this context is the potential increase in labour supply and the resulting increase in the taxable base and decrease in unemployment allowances. In this study we calculate the cost recovery based on a micro-simulation model that includes a labour supply model. We find that there is indeed a clearly positive effect on labour supply and hence also on the tax base. By introducing a revenue-neutral flat tax, labour supply increases by approximately 47,000 full-time equivalents. However, the effect is limited because, compared to a static scenario the cost recovery only allows the revenue-neutral flat tax to decrease from 38.5% to 37%. Furthermore, there is little or no impact of these employment effects on the strongly regressive nature of a flat tax reform.
    Date: 2008–08
  8. By: Kinnunen, Helvi (Bank of Finland Research)
    Abstract: This paper investigates public pension funding using a dynamic general equilibrium macroeconomic model (DSGE) that facilitates investigation of distortionary effects of fiscal and pension policy responses to ageing. The model is calibrated to the Finnish economy, which will encounter substantial ageing pressures in the near future. During the transition to an older population structure ageing costs can be substantially lowered by allowing public funds to smooth out the tax responses. Cutting down on pension prefunding at a time when the pace of ageing is at its peak reduces the necessary tax hikes and stimulates labour supply growth at the moment when the labour market is tightest. With smaller funding needs, ageing leads to a slower growth in labour costs, a better employment conditions and faster production growth.
    Keywords: ageing; general equilibrium; public finance; government funds
    JEL: E13 H55 J11 J26
    Date: 2008–09–23
  9. By: Abe, Kazutomo; Wilson, John S.
    Abstract: This paper examines the impact of reducing corruption and improving transparency to lower trade costs in the Asia Pacific Economic Cooperation region. The authors find, based on a computable general equilibrium model, significant potential trade and welfare gains for Asia Pacific Economic Cooperation members, with increased transparency and lower levels of corruption. Results suggest that trade in the region would increase by 11 percent and global welfare would expand by $406 billion by raising transparency to the average in the region. Most of the increase in welfare would take place in member economies undertaking reform. Among the reformers, the gross domestic product of Vietnam, Thailand, Russia, and the Philippines would increase approximately 20 percent. The benefits to Malaysia and China would also be substantial with increased transparency and lower levels of corruption.
    Keywords: Economic Theory&Research,Free Trade,Trade Policy,Emerging Markets,Currencies and Exchange Rates
    Date: 2008–09–01

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