New Economics Papers
on Computational Economics
Issue of 2009‒08‒08
ten papers chosen by

  1. Optimal Placement of Conservation Practices Using Genetic Algorithm with SWAT By Jha, Manoj; Rabotyagov, Sergey; Gassman, Philip W.
  2. The Greek Current Account Deficit:Is it Sustainable after all? By George A. Zombanakis; Constantinos Stylianou; Andreas S. Andreou
  3. "An Agent Based Cournot Simulation with Innovation: Identifying the Determinants of Market Concentration" By Kochanski, Tim
  4. Impacts of FTAs in East Asia: CGE Simulation Analysis By ANDO Mitsuyo
  5. Trade Coefficients and the Role of Elasticity in a Spatial CGE Model Based on the Armington Assumption By Ando, Asao; Meng, Bo; Chao, Qu
  6. Disaggregated Data and Trade Policy Analysis: The Value of Linking Partial and General Equilibrium Models By Narayanan, Badri; Hertel, Thomas; Horridge, Mark
  7. Financial Policies and Dynamic Game Simulation in Poland and Hungary By Yoshino, Hisao
  8. Dynamic Tax Competition under Asymmetric Productivity of Public Capital By Tanaka, H.; Hidaka, M.
  9. Finding optimal policies in the (S - 1, S ) lost sales inventory model with multiple demand classes By Jaarsveld, W.L. van; Dekker, R.
  10. Macroeconomic Implications of Alternative Tax Regimes: The Case of Greece By Dimitris Papageorgiou

  1. By: Jha, Manoj; Rabotyagov, Sergey; Gassman, Philip W.
    Abstract: The effectiveness of conservation practices depends on their placement on the fields within the watershed. Cost-effective placement of these practices for maximum water quality benefits on each field requires comparing a very large number of possible land-use scenarios. To address this problem, we combine the tools of evolutionary algorithm with the Soil and Water Assessment Tool (SWAT) model and cost data to develop a trade-off frontier of least cost of achieving nutrient reductions and the corresponding locations of conservation practices. This approach was applied to the Raccoon River Watershed, which drains about 9,400 km2 of an intensive agriculture region in west-central Iowa. Applying genetic algorithm to the calibrated SWAT modeling setup produced multitudes of optimal solutions of achieving nutrient reductions in relation to the total cost of placing these practices. For example, a 30% reduction in nitrate (and a corresponding 53% reduction in phosphorus) at the watershed outlet can be achieved with a cost of $80 million per year. This solution frontier allows policymakers and stakeholders to explicitly see the trade-offs between cost and nutrient reductions.
    Keywords: genetic algorithm, nutrient calibration, Raccoon River Watershed, SWAT.
    Date: 2009–07–31
  2. By: George A. Zombanakis (Bank of Greece); Constantinos Stylianou (University of Cyprus); Andreas S. Andreou (University of Cyprus)
    Abstract: The large Greek current account deficit figures reported during the past few years have become the source of increasing concern regarding its sustainability. Bearing in mind the variety of techniques employed and the views expressed as regards the analysis and the assessment of the size of the current account deficit, this paper resorts to using neural network architectures to demonstrate that, despite its size, the current account deficit of Greece can be considered sustainable. This conclusion, however, is not meant to neglect the structural weaknesses that lead to such a deficit. In fact, even in the absence of any financing requirements these high deficit figures point to serious competitiveness losses with everything that these may entail for the future performance of the Greek economy.
    Keywords: Neural Networks; Current Account Deficit Sustainability
    JEL: C45 F32
    Date: 2009–06
  3. By: Kochanski, Tim
    Abstract: In this paper, I develop a hybrid model that contains elements of both agent based simulations (ABS) as well as analytic Cournot models, to study the effects of firm characteristics, market characteristics, and innovation on market concentration, as measured by a Herfindahl-Hirschman Index (HHI). The model accommodates the following components: multiple firms with heterogeneous marginal costs, market entry and exit, barriers to entry, low or high cost industries, changing demand, varying levels of marginal cost reducing returns-to-innovation, varying costs associated with innovation, increased returns to innovation from past experience innovating, and varying propensities to innovate within the market. The components mentioned above are commonly cited as determinants of market concentration. A sensitivity analysis which is robust to high degrees of model complexity demonstrates that the model provides results that are consistent with economic theories of markets.
    Keywords: agent based simulation; Cournot; game; innovation; oligopoly
    JEL: C79 D43
    Date: 2009–06
  4. By: ANDO Mitsuyo
    Abstract: In light of the recent movement toward regional integration through bilateral/plurilateral FTAs in East Asia, this paper attempts to estimate the impacts of several FTA scenarios in East Asia, using a CGE model. Although most previous simulation studies on the impacts of FTAs focus only on the liberalization of trade in goods, our paper attempts to consider other possible aspects of FTAs such as various trade and investment facilitation and technical assistance to developing countries in the region. Our results suggest that the economic effects of FTAs with a larger number of members are likely to be greater. Moreover, for the establishment of FTAs among countries such as ASEAN+3, ASEAN+6, and APEC, a high quality of trade liberalization including the agricultural sector is essential. Furthermore, it is vital for an agreement to be comprehensive, covering not only intraregional trade liberalization but also other elements such as facilitation measures and technical assistance. The larger the coverage, in terms of membership and contents, the greater the benefits accrued to the members.
    Date: 2009–07
  5. By: Ando, Asao; Meng, Bo; Chao, Qu
    Abstract: The Armington Assumption in the context of multi-regional CGE models is commonly interpreted as follows: Same commodities with different origins are imperfect substitutes for each other. In this paper, a static spatial CGE model that is compatible with this assumption and explicitly considers the transport sector and regional price differentials is formulated. Trade coefficients, which are derived endogenously from the optimization behaviors of firms and households, are shown to take the form of a potential function. To investigate how the elasticity of substitutions affects equilibrium solutions, a simpler version of the model that incorporates three regions and two sectors (besides the transport sector) is introduced. Results indicate: (1) if commodities produced in different regions are perfect substitutes, regional economies will be either autarkic or completely symmetric and (2) if they are imperfect substitutes, the impact of elasticity on the price equilibrium system as well as trade coefficients will be nonlinear and sometimes very sensitive.
    Keywords: Armington Assumption, Spatial CGE, Elasticity of substitution, Trade coefficient, Econometric model
    JEL: C68 R13 R15
    Date: 2009
  6. By: Narayanan, Badri; Hertel, Thomas; Horridge, Mark
    Abstract: Computable General Equilibrium (CGE) models are now routinely utilized for the evaluation of trade policy reforms, yet they are typically quite highly aggregated, which limits their usefulness to trade negotiators who are often interested in impacts at the tariff line. On the other hand, Partial Equilibrium (PE) models, which are typically used for analysis at disaggregate levels, deprive the researcher of the benefits of an economy-wide analysis, which is required to examine the overall impact of broad-based trade policy reforms. Therefore, a PE-GE, nested modeling framework has the prospect of offering an ideal tool for trade policy analysis. In this paper, we develop a PE model that captures international trade, domestic consumption and output, using Constant Elasticity of Transformation (CET) and Constant Elasticity of Substitution (CES) structures, market clearing conditions and price linkages, nested within the standard GTAP Model. In particular, we extend the welfare decomposition of Huff and Hertel (2001) to this PE-GE model in order to contrast the sources of welfare gain in PE and GE analyses. To illustrate the usefulness of this model, we examine the contentious issue of tariff liberalization in the Indian auto sector, using PE, GE and PE-GE models. Both the PE and PE-GE models show that the imports of Motorcycles and Automobiles change drastically with both unilateral and bilateral tariff liberalization by India, but the PE model does a poor job predicting the overall size and price level in the industry, post-liberalization. On the other hand, the GE model overestimates substitution between regional suppliers due to false competition and underestimates the welfare gain, due to the problem of tariff averaging in the aggregated model. These findings are shown to be robust to wide variation in model parameters. We conclude that the linked model is superior to both the GE and PE counterparts.
    Date: 2009
  7. By: Yoshino, Hisao
    Abstract: Recently, steady economic growth rates have been kept in Poland and Hungary. Money supplies are growing rather rapidly in these economies. In large, exchange rates have trends of depreciation. Then, exports and prices show the steady growth rates. It can be thought that per capita GDPs are in the same level and development stages are similar in these two countries. It is assumed that these two economies have the same export market and export goods are competing in it. If one country has an expansion of monetary policy, price increase and interest rate decrease. Then, exchange rate decrease. Exports and GDP will increase through this phenomenon. At the same time, this expanded monetary policy affects another country through the trade. This mutual relationship between two countries can be expressed by the Nash-equilibrium in the Game theory. In this paper, macro-econometric models of Polish and Hungarian economies are built and the Nash- equilibrium is introduced into them.
    Keywords: East Europe, Poland, Hungary, Monetary policy, Nash-equilibrium, Game theory, Macro-econometric model, Trade, Simulation, Reaction function, Money supply, Central bank
    JEL: C73 E17 E52 F42
    Date: 2009–03
  8. By: Tanaka, H.; Hidaka, M.
    Abstract: We here expand the static tax competition models in symmetric small regions, which were indicated by Zodrow and Mieszkowski (1986) and Wilson (1986), to a dynamic tax competition model in large regions, taking consideration of the regional asymmetry of productivity of public capital and the existence of capital accumulation. The aim of this paper is to verify how the taxation policy affects asymmetric equilibrium based on a simulation analysis using an overlapping generations model in two regions. It is assumed that the public capital as a public input is formed on the basis of the capital tax of local governments and the lump-sum tax of the central government. As demonstrated in related literature, the optimal capital tax rate should become zero when the lump-sum tax is imposed only on older generations, however, the optimal tax rate may become positive when it is imposed proportionally on younger and older generations. In the asymmetric equilibrium, several cooperative solutions can possibly exist which can achieve a higher welfare standard than the actualized cooperative solution either in Region1 or 2..
    Keywords: Tax competition, Capital taxation, Capital accumulation, Public inputs, Infrastructure
    JEL: H21 H42 H71 H77 R13 R53
    Date: 2009–07–30
  9. By: Jaarsveld, W.L. van; Dekker, R. (Erasmus Econometric Institute)
    Abstract: This paper examines the algorithms proposed in the literature for finding good critical level policies in the (S-1,S) lost sales inventory model with multiple demand classes. Our main result is that we establish guaranteed optimality for two of these algorithms. This result is extended to different resupply assumptions, such as a single server queue. As a corollary, we provide an alternative proof of the optimality of critical level policies among the class of all policies.
    Keywords: inventory;multiple demand classes;customer differentiation;rationing lost sales;stochastic dynamic programming
    Date: 2009–07–23
  10. By: Dimitris Papageorgiou (Athens University of Economics and Business)
    Abstract: This paper uses a Dynamic General Equilibrium model that incorporates a detailed fiscal policy structure to examine how changes in the tax mix influence economic activity and welfare in the Greek economy. The results suggest that tax reforms that reduce the labour and capital income tax rates and increase the consumption tax rate lead to higher levels of output, consumption and private investment. If the goal of tax policy is to promote economic growth by changing the tax mix, then it should reduce the capital income tax rate and increase the consumption tax rate. In contrast, a lifetime welfare promoting policy would be to cut the labour income tax rate and increase the consumption tax rate.
    Keywords: Fiscal Policy; Transitional dynamics; Economic growth; Welfare
    JEL: E62
    Date: 2009–05

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