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on Computational Economics |
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Issue of 2009‒02‒14
seven papers chosen by |
| By: | Ángel Gavilán (Banco de España); Juan A. Rojas (Banco de España) |
| Abstract: | We propose a new numerical method to solve stochastic models that combines the parameterized expectations (PEA) and the Smolyak algorithms. This method is especially convenient to address problems with occasionally binding constraints (a feature inherited from PEA) and/or a large number of state variables (a feature inherited from Smolyak), i.e. DSGE models that incorporate portfolio problems and incomplete markets. We describe the proposed Smolyak-PEA algorithm in the context of a one-country stochastic neoclassical growth model and compare its accuracy with that of a standard PEA collocation algorithm. Despite estimating fewer parameters, the former is able to reach the high accuracy levels of the latter. We further illustrate the working of this algorithm in a two-country neoclassical model with incomplete markets and portfolio choice. Again, the Smolyak-PEA algorithm approximates the solution of the problem with a high degree of accuracy. Finally, we show how this algorithm can efficiently incorporate both occasionally binding constraints and a partial information approach. |
| Keywords: | Portfolio Choice, Dynamic Macroeconomics, Computational Methods |
| JEL: | E2 C68 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0838&r=cmp |
| By: | Adriaan van Zon; Thomas S. Lontzek |
| Abstract: | In the past years biofuels have received increased attention since they were believed to contribute to rural development, energy security and to fight global warming. It became also clear, though, that bioenergy cannot be evaluated independently of the rest of the economy and that national and international feedback effects are important. Computable general equilibrium (CGE) models have been widely employed in order to study the effects of international climate policies. The main characteristic of these models is their encompassing scope: Global models cover the whole world economy disaggregated into regions and countries as well as diverse sectors of economic activity. Such a modelling framework unveils direct and indirect feedback effects of certain policies or shocks across sectors and countries. CGE models are thus well suited for the study of bioenergy/biofuel policies. One can currently find various approaches in the literature of incorporating bioenergy into a CGE framework. This paper intends to give an overview of existing approaches and to critically assess their respective power. Grouping different approaches into categories and highlighting their advantages and disadvantages is important for giving a structure to this rather recent and rapidly growing research area and to provide a guidepost for future work |
| Keywords: | Induced biased technological change, Putty-clay Vintage Models, Energy, Renewable resources |
| JEL: | E22 O31 O33 Q42 Q48 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1474&r=cmp |
| By: | Jan van Heerden (Department of Economics, University of Pretoria) |
| Abstract: | A Computable General Equilibrium model is used to find the effects of a food voucher scheme on the economy in South Africa. If firms consider the issuing of vouchers as increased remuneration, they will hire fewer labourers. The higher labour cost increases the total cost of production and lowers supply. Real Gross Domestic Product decreases and the economy becomes worse off. However, depending on the size of the government's involvement in such a scheme as well as the tax policies that are used to fund it, a food voucher scheme could benefit the poor, and improve the distribution of wealth in the country. |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:200837&r=cmp |
| By: | Luciano Fanti; Luca Gori |
| Abstract: | Unemployment and population ageing are probably two of the most important concerns in developed countries. Since reforming labour markets is high on the political agenda, a theoretical knowledge of the possible long-run interaction between unemployment and the childcare system may be highly valuable. Applying a fairly standard OLG model with endogenous fertility and minimum wages, we show that a child tax (rather than the more conventional child subsidy) can be used as an instrument (1) to promote population growth and (2) to reduce unemployment and, in particular, to restore the full employment equilibrium. |
| Keywords: | Child Tax; Fertility; OLG model; Unemployment |
| JEL: | H24 J13 J18 |
| Date: | 2009–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2009/76&r=cmp |
| By: | Hervé Crès (Sciences Po (Paris Institute of Political Studies)); Mich Tvede (Department of Economics, University of Copenhagen) |
| Abstract: | In the present paper we study voting-based corporate control in a general equilibrium model with incomplete financial markets. Since voting takes place in a multi-dimensional setting, super-majority rules are needed to ensure existence of equilibrium. In a linear-quadratic setup we show that the endogenization of voting weights (given by portfolio holdings) can give rise to - through self-fulfilling expectations - dramatical political instability, i.e. Condorcet cycles of length two even for very high majority rules. |
| Keywords: | D21; D52; D71; D72 |
| JEL: | D63 I32 O15 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0901&r=cmp |
| By: | Goebel, Christian; Verhofstadt, Elsy |
| Abstract: | Many school-leavers enter the labour market via temporary employment. In this paper we investigate the impact of a temporary employment spell at the start of the career on the transition rate into permanent employment. We compare the case of temporary employment to the hypothetical case of a direct transition from unemployment to permanent employment. In order to control for selective participation in temporary employment we include a large set of explanatory variables which have been especially collected to study school-leavers. We apply the AIC-information criterion to select the appropriate specification for unobserved heterogeneity. Based on the information criteria we conclude that given our data, there is no support for a model with selection in unobserved characteristics. Simulation exercises provide insights into the development of the effect of temporary employment over time. For a sample of unemployed Flemish school-leavers we find that in the short run temporary employment delays the school leaver’s transition to permanent employment. However, in the long run temporary employment acts as a stepping stone and decreases the duration until permanent employment. |
| Keywords: | temporary employment, school leavers, labour market policy |
| JEL: | J08 J41 J64 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7435&r=cmp |
| By: | Satyajit Chatterjee (Federal Reserve Bank of Philadelphia); Burcu Eyigungor |
| Abstract: | We present a novel and tractable model of long-term sovereign debt. We make two sets of contributions. First, on the substantive side, using Argentina as a test case we show that unlike one-period debt models, our model of long-term sovereign debt is capable of accounting for the average spread, the average default frequency, and the average debt-tooutput ratio of Argentina over the 1991-2001 period without any deterioration in the model’s ability to account for Argentina’s cyclical facts. Using our calibrated model we determine what Argentina’s debt, default frequency and welfare would have been if Argentina had issued only short-term debt. Second, on the methodological side, we advance the theory of sovereign debt begun in Eaton and Gersovitz (1981) by establishing the existence of an equilibrium pricing function for long-term sovereign debt and by providing a fairly complete set of characterization results regarding equilibrium default and borrowing behavior. In addition, we identify and solve a computational problem associated with pricing long-term unsecured debt that stems from nonconvexities introduced by the possibility of default. |
| Keywords: | Unsecured Debt, Sovereign Debt, Long Duration Bonds, Debt Dilution, Random Maturity Bonds, Default Risk |
| JEL: | F34 F41 G12 G33 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:0901&r=cmp |