nep-cmp New Economics Papers
on Computational Economics
Issue of 2008‒10‒13
eleven papers chosen by
Stan Miles
Thompson Rivers University

  1. DOAM for Evolutionary Portfolio Optimization: a computational study. By Gabriella Dellino; Mariagrazia Fedele; Carlo Meloni
  2. Creating and managing an impossibly large CGE database that is up-to-date By Mark Horridge; Glyn Wittwer
  3. Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives By Paulus, Alari; Peichl, Andreas
  4. Investigating uncertainty in macroeconomic forecasts by stochastic simulation By Debby Lanser; Henk Kranendonk
  5. Distributional Deviations in Random Number Generation in Finance By Sergio Chavez; Eckhard Platen
  6. AGEFIS:Applied General Equilibrium for FIScal Policy Analysis By Arief Anshory Yusuf; Djoni Hartono; Wawan Hermawan; Yayan
  7. New perspectives on realism, tractability, and complexity in economics By Smith, Peter
  8. Population Ageing, Labour Market Reform and Economic Growth in China - A Dynamic General Equilibrium Analysis By Xiujian Peng; Yinhua Mai
  9. The Benefits of Linking CGE and Microsimulation Models: Evidence from a Flat Tax Analysis By Peichl, Andreas
  10. Dynamic Objectives Aggregation in Multi-objective Evolutionary Optimization By Gabriella Dellino; Mariagrazia Fedele; Carlo Meloni
  11. Balancing mixed-model assembly lines: A computational evaluation of objectives to smoothen workload By Simon Emde; Nils Boysen; Armin Scholl

  1. By: Gabriella Dellino; Mariagrazia Fedele; Carlo Meloni
    Abstract: In this work, the ability of the Dynamic Objectives Aggregation Methods to solve the portfolio rebalancing problem is investigated conducting a computational study on a set of instances based on real data. The portfolio model considers a set of realistic constraints and entails the simultaneously optimization of the risk on portfolio, the expected return and the transaction cost.
    Date: 2008–03
  2. By: Mark Horridge; Glyn Wittwer
    Abstract: Large-scale multi-regional CGE models of Australia, such as MMRF and TERM, underlie most CoPS consulting work. The regional detail, modelled in bottom-up fashion, greatly interests policy makers and is often needed to answer questions like: how would less rainfall in southern Australia affect the economy? To support this work, we have devised a variable disaggregation master database for any combination of over 1,400 statistical local areas (SLAs). Such a database may represent 172 sectors in over 100 regions. It would be slow to run simulations with so much detail, so we routinely aggregate the database before using it. Each aggregation is tailored to preserve the regional and sectoral detail that is pertinent to a particular policy issue. This paper describes the procedure used to generate a master database, starting from a published national 2001-2 input-output table, and various international trade and census data from other dates. A levels adjustment program is used to update the published input-output table from 2001-02 to 2005-06. This makes it easier to use regional data from national accounts and the 2006 census. The whole procedure is automated via a series of programs. This forms a basis for documentation and also allows us to repeat the whole procedure with different inputs. For example, we could reaggregate the SLAs to distinguish zones within each capital city, if desired. Some of our methods may be useful in global CGE models as practitioners modify databases to deal with policy issues. We have adapted the methodology of variable disaggregation to develop the first ever bottom-up representation of the Australian economy by its 150 federal electorates.
    Keywords: regional modelling, CGE modelling, database development
    JEL: C68 C81 R13 R15
    Date: 2008–05
  3. By: Paulus, Alari (ISER, University of Essex); Peichl, Andreas (IZA)
    Abstract: The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.
    Keywords: flat tax reform, income distribution, work incentives, microsimulation
    JEL: C81 D31 H24
    Date: 2008–09
  4. By: Debby Lanser; Henk Kranendonk
    Abstract: Uncertainty is an inherent attribute of any forecast. In this paper, we investigate four sources of uncertainty with CPB’s macroeconomic model SAFFIER: provisional data, exogenous variables, model parameters and residuals of behavioural equations. We apply a Monte Carlo simulation technique to calculate standard errors for the short-term and medium-term horizon for GDP and eight other macroeconomic variables. The results demonstrate that the main contribution to the total variance of a medium-term forecast, emanates from the uncertainty in the exogenous variables. For the short-term forecast both exogenous variables and provisional data are most relevant.
    Keywords: Monte Carlo simulation; Macro economic forecasting; Model uncertainty
    JEL: C15 C53 E20 E27
    Date: 2008–09
  5. By: Sergio Chavez (School of Finance and Economics, University of Technology, Sydney); Eckhard Platen (School of Finance and Economics, University of Technology, Sydney)
    Abstract: This paper points out that pseudo-random number generators in widely used standard software can generate severe distributional deviations from targeted distributions when used in parallel implementations. In Monte Carlo simulation of random walks for financial applications this can lead to remarkable errors. These are not reduced when increasing the sample size. The paper suggests to use instead of standard routines, combined feedback shift register methods for generating random bits in parallel that are based on particular polynomials of degree twelve. As seed numbers the use of natural random numbers is suggested. The resulting hybrid random bit generators are then suitable for parallel implementation with random walk type applications. They show better distributional properties than those typically available and can produce massive streams of random numbers in parallel, suitable for Monte Carlo simulation in finance.
    Keywords: Pseudo-random number generators; parallel random bit generators; Monte Carlo simulation; feedback shift register method
    JEL: G10 G13
    Date: 2008–07–01
  6. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University); Djoni Hartono (Graduate Program of Economics, University of Indonesia); Wawan Hermawan (Department of Economics, Padjadjaran University); Yayan (Department of Economics, Padjadjaran University)
    Abstract: AGEFIS (Applied General Equilibrium model for FIScal Policy Analysis) is a Computable General Equilibrium (CGE) model designed specifically, but not limited, to analyze various aspects of fiscal policies in Indonesia. It is yet, the first Indonesian fully-SAM-based CGE model solved by Gempack. This paper describes the structure of the model and illustrates its application.
    Keywords: AGEFIS, CGE, Fiscal Policy, Indonesia
    JEL: C68 D58 H30
    Date: 2008–10
  7. By: Smith, Peter
    Abstract: Fuzzy logic and genetic algorithms are used to rework more realistic (and more complex) models of competitive markets. The resulting equilibria are significantly different from the ones predicted from the usual static analysis; the methodology solves the Walrasian problem of how markets can reach equilibrium, starting with firms trading at disparate prices. The modified equilibria found in these complex market models involve some mutual self-restraint on the part of the agents involved, relative to economically rational behaviour. Research (using similar techniques) into the evolution of collaborative behaviours in economics, and of altruism generally, is summarized; and the joint significance of these two bodies of work for public policy is reviewed. The possible extension of the fuzzy/ genetic methodology to other technical aspects of economics (including international trade theory, and development) is also discussed, as are the limitations to the usefulness of any type of theory in political domains. For the latter purpose, a more differentiated concept of rationality, appropriate to ill-structured choices, is developed. The philosophical case for laissez-faire policies is considered briefly; and the prospects for change in the way we ‘do economics’ are analysed.
    Keywords: Fuzzy logic; genetic algorithms; complexity; emergence; rationality; ill-structured choice; equilibrium; Walrasian Crier; paradigm change;
    JEL: B0 C61 B41
    Date: 2008–10–02
  8. By: Xiujian Peng; Yinhua Mai
    Abstract: The dramatic fertility decline since the beginning of 1970s has decelerated the growth of China's working age population. From 2015, this growth will turn sharply negative, resulting declining labour force in China. This has caused concerns about the sustainability of China's economic growth. This paper sheds lights on the view that a more efficient allocation of labour between sectors is likely counter balance the negative effect of populating ageing. Using a dynamic CGE model of China, we analyse the effects of removing labour market distortions that hinder the movement of labour from agricultural to manufacturing and services sectors over the period 2008 to 2020 in the context of declining growth of labour supply in China. Simulation results shows that removing the discriminations against rural workers in urban area will increase the labour shift from agricultural to non-agricultural sectors. The resulting increase in the movement of rural labour will mitigate the adverse effects of population ageing by raising not only the growth rate of total output but also household living standard. China can enjoy continued growth in its manufactured exports even with a slower growth in its labour force.
    Keywords: population ageing, labour market reform, rural migration, CGE model, China
    JEL: J21 J61 E17
    Date: 2008–05
  9. By: Peichl, Andreas (IZA)
    Abstract: Mircrosimulation models (MSM) and Computable General Equilibrium models (CGE) have both been widely used in policy analysis. The combination of these two model types allows the utilisation of the advantages of both types. The aim of this paper is to describe the state-of-the-art in simulation and to demonstrate the benefits of linking both model types modelling flat tax reform proposals for Germany. Taking the general equilibrium effects into account has important implications for the evaluation of a tax reform. The analysis shows that a personal income flat tax can indeed overcome the fundamental equity efficiency trade-off in the long-run while simultaneously increasing the tax revenue. However, this result does not hold for a flat tax combining a personal income flat tax with a corporate cash flow flat tax, even when allowing for an ex-post loss in revenue.
    Keywords: microsimulation, CGE, linked micro macro models, flat tax
    JEL: D58 H2 J22
    Date: 2008–09
  10. By: Gabriella Dellino; Mariagrazia Fedele; Carlo Meloni
    Abstract: Several approaches for solving multi-objective optimization problems entail a form of scalarization of the objectives. This paper proposes a study of different dynamic objectives aggregation methods in the context of evolutionary algorithms. These methods are mainly based on both weighted sum aggregations and curvature variations. A comparison analysis is presented on the basis of a campaign of computational experiments on a set of benchmark problems from the literature.
    Keywords: Multi-objective optimization, Evolutionary algorithms, Aggregate objective functions
    Date: 2008–03
  11. By: Simon Emde (Chair of Operations Management, Friedrich-Schiller-University Jena); Nils Boysen (Chair of Operations Management, Friedrich-Schiller-University Jena); Armin Scholl (Chair of Decision Analysis and Management Science, Friedrich-Schiller-University Jena)
    Abstract: Mixed-model assembly lines are widely used in a range of production settings, such as the final assembly of the automotive and electronics industries, where they are applied to mass-produce standardized commodities. One of the greatest challenges when installing and reconfiguring these lines is the vast product variety modern mixed-model assembly lines have to cope with. Traditionally, product variety is bypassed during mid-term assembly line balancing by applying a joint precedence graph, which represents an (artificial) average model and serves as the input data for a single model assembly line balancing procedure. However, this procedure might lead to considerable variations in the station times, so that serious sequencing problems emerge and work overload threatens. To avoid these difficulties different extensions of assembly line balancing for workload smoothing, i.e., horizontal balancing, have been introduced in the literature. The paper on hand introduces a multitude of known and yet unknown objectives for workload smoothing and systematically tests these measures in a comprehensive computational study. The results suggest that workload smoothing is an essential task in mixed-model assembly lines and that some (of the newly introduced) objectives are superior to others.
    Keywords: Mixed-model assembly lines, assembly line balancing, sequencing, workload smoothing
    Date: 2008–10–05

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