nep-cmp New Economics Papers
on Computational Economics
Issue of 2009‒03‒22
seven papers chosen by
Stan Miles
Thompson Rivers University

  1. Computational Analysis of APEC Trade Liberalization By Kozo Koyota; Robert M. Stern
  2. Storm in a Spaghetti Bowl: FTA's and the BRIICS By Kozo Koyota; Margit Molnar; Robert M. Stern
  3. Modelling the Effects of Immigration on Regional Economic Performance and the Wage Distribution: A CGE Analysis of Three EU Regions By Pouliakas, Konstantinos; Roberts, Deborah; Balamou, Eudokia; Psaltopoulos, Dimitris
  4. Maturity, indebtedness, and default risk By Satyajit Chatterjee; Burcu Eyigungor
  5. A Computationally Practical Simulation Estimation Algorithm for Dynamic Panel Data Models with Unobserved Endogenous State Variables By Keane, Michael P.; Sauer, Robert M.
  6. Trade Liberalization and Income Distribution: A CGE Model for Jordan By Omar Feraboli; Tim Trimborn
  7. Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family By Yu, Yugang; Huang, G.Q.

  1. By: Kozo Koyota (Research Seminar in International Economics, University of Michigan); Robert M. Stern (University of Michigan, Ann Arbor)
    Abstract: In this study, we use the Michigan Model of World Production and Trade to analyze the economic welfare effects of APEC free trade, unilateral free trade for individual APEC members, and global free trade for all countries/regions covered in the Michigan Model. The Michigan Model is a multi-country, multi-sectoral computational general equilibrium (CGE) model of the global trading system. The version of the model used includes 31 countries/regions plus the rest-of-world and 27 sectors in each country/region. Nineteen APEC members are covered. The computational results suggest that APEC free trade would result in sizable increases in the economic welfare of the individual APEC members in both absolute terms and as a percentage of GDP. There would be trade diversion effects for non-APEC countries, except for the Rest of Middle East. Unilateral free trade for the APEC members would result in larger welfare gains as compared to APEC free trade for 7 of the 19 APEC members. The welfare benefits of APEC free trade are thus larger for more APEC members than unilateral free trade. Finally, global (multilateral) free trade by all of the countries/regions covered in the Michigan Model suggests much larger benefits for all APEC members compared to APEC free trade and APEC unilateral free trade. While global free trade is a limiting case, the computational results presented are testimony to the significant welfare benefits that could be realized from successful pursuit of future multilateral trade liberalization.
    Keywords: APEC, trade
    Date: 2008–06
  2. By: Kozo Koyota (Research Seminar in International Economics, University of Michigan); Margit Molnar (Organisation for Economic Co-operation and Development (OECD)); Robert M. Stern (University of Michigan)
    Abstract: In this study we analyze the welfare and sectoral effects of a variety of options for the formation of free trade agreements by several major emerging market economies. The economies covered include: Brazil, Russia, India, Indonesia, China, and South Africa (BRIICS). The analysis is carried out using the Michigan Model of World Production and Trade, which is a multi-country, multi-sectoral computational general equilibrium (CGE) model of the global trading system. The version of the model that we use includes 31 countries/regions plus the rest-of-world and 27 sectors in each country/region. The unique feature of our study is that we have analyzed the simultaneous removal of trade barriers for the BRIICS countries with a variety of FTA partners. The computational results presented thus reflect both the direct effects of the bilateral FTAs and the effects of the other FTAs assumed to be undertaken. The computational results suggest that the welfare effects of the different FTA options are for the most part fairly small in absolute terms and as a percentage of GDP. We compare the FTA results with assumed adoption of unilateral free trade by the individual BRIICS nations and global (multilateral) free trade by all of the countries/regions covered in the Michigan Model. These calculations suggest that the welfare benefits of global (multilateral) free trade are much greater than the benefits to be derived from the various FTAs for the BRIICS countries that we have analyzed and from the assumed unilateral free trade for these countries.
    Keywords: BRIICS, free trade, welfare
    Date: 2008–12
  3. By: Pouliakas, Konstantinos; Roberts, Deborah; Balamou, Eudokia; Psaltopoulos, Dimitris
    Abstract: The paper uses a regional Computable General Equilibrium (CGE) model to analyse the effects of immigration on three small remote EU regions located within Scotland, Greece and Latvia. Two migration scenarios are assessed. In the first, total labour supply is affected. In the second, the importance of migratory flows by differential labour skill types is investigated. The results indicate significant differences in the extent to which regional economies are affected by immigration. They also suggest that remote regions are highly vulnerable to the out-migration of skilled workers (‘brain-drain’) while the in-migration of unskilled workers leads to widening wage inequality.
    Keywords: Immigration; CGE; Skills; Wage Inequality; Brain-drain; Regional economies
    JEL: R13 D33 D58 R23
    Date: 2008–11–30
  4. By: Satyajit Chatterjee; 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-to-output 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: Default (Finance) ; Debts, Public ; Bonds
    Date: 2009
  5. By: Keane, Michael P. (University of Technology, Sydney); Sauer, Robert M. (University of Bristol)
    Abstract: This paper develops a simulation estimation algorithm that is particularly useful for estimating dynamic panel data models with unobserved endogenous state variables. The new approach can easily deal with the commonly encountered and widely discussed "initial conditions problem," as well as the more general problem of missing state variables during the sample period. Repeated sampling experiments on dynamic probit models with serially correlated errors indicate that the estimator has good small sample properties. We apply the estimator to a model of married women's labor force participation decisions. The results show that the rarely used Polya model, which is very difficult to estimate given missing data problems, fits the data substantially better than the popular Markov model. The Polya model implies far less state dependence in employment status than the Markov model. It also implies that observed heterogeneity in education, young children and husband income are much more important determinants of participation, while race is much less important.
    Keywords: initial conditions, missing data, simulation, female labor force participation
    JEL: C15 C23 C25 J13 J21
    Date: 2009–03
  6. By: Omar Feraboli (Chemnitz University of Technology); Tim Trimborn (University of Hannover)
    Abstract: The Association Agreement between Jordan and the EU entered into force in 2002. It provides a gradual reduction of import duties on EU products over a period of twelve years. In this paper we investigate the economic implications of induced trade liberalization on aggregate economic performance as well as effects on welfare and income distribution of heterogenous households. This is done by introducing heterogenous households into a standard neoclassical dynamic computable general equilibrium model. Thereby individual households' tax rate, wage rate, initial endowment of assets, transfers from government and abroad, as well as individual preferences, are calibrated by data from a household survey. This paper was presented at the 18th International Conference of the International Trade and Finance Association, meeting at Universidade Nova de Lisboa, Lisbon, Portugal, on May 22, 2008.
    Date: 2008–08–06
  7. By: Yu, Yugang; Huang, G.Q. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications.
    Keywords: supply chain management;nash game model;vendor managed inventory
    Date: 2009–03–02

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