New Economics Papers
on Computational Economics
Issue of 2010‒01‒30
seventeen papers chosen by

  1. A framework for adaptive Monte-Carlo procedures By Bernard Lapeyre; J\'er\^ome Lelong
  2. Economic Freedom and Foreign Direct Investment: How different are the MENA countries from the EU? By José Martins Caetano; António Bento Caleiro
  3. Chaos Models in Economics By Sorin Vlad; Paul Pascu; Nicolae Morariu
  4. Impact Assessment of National and Regional Policies Using the Philippine Regional General Equilibrium Model By Roehlano M. Briones
  5. Stochastic Switching Games and Duopolistic Competition in Emissions Markets By Michael Ludkovski
  6. Impacts of the Free Trade Area of the Pacific (FTAAP) on Production, Consumption, and Trade of the Philippines By U-Primo E. Rodriguez
  7. A P2P File Sharing Network Topology Formation Algorithm Based on Social Network Information By Jorn Altmann; Zelalem Berhanu Bedane
  8. Productivity and Firm Selection: Quantifying the "New" Gains from Trade. By Gregory Corcos; Massimo Del Gatto; Giordano Mion; Gianmarco I.P. Ottaviano
  9. Forecasting Romanian Financial System Stability using a Stochastic Simulation Model By Claudiu Tiberiu Albulescu
  10. The Impact of a Philippine-US FTA- The Case of Philippine Agriculture By U-Primo E. Rodriguez; Liborio S. Cabanilla
  11. Vietnam's Trade Policy Dilemmas By David Vanzetti; Pham Lan Huong
  12. Error Recovery for SLA-Based Workflows within the Business Grid By Dang Minh Quan; Jorn Altmann; Laurence T. Yang
  13. Capacity Planning in Economic Grid Markets By Marcel Risch; Jorn Altmann
  14. Controlled diffusion processes with markovian switchings for modeling dynamical engineering systems By Héctor Cañada; Rosario Romera
  15. Another tempo distortion: analyzing controlled fertility by age-specific marital fertility rate By Kiyosi Hirosima
  16. Grid Business Models for Brokers Executing SLA-Based Workflows By Dang Minh Quan; Jorn Altmann
  17. The GridEcon Platform: A Business Scenario Testbed for Commercial Cloud Services By Marcel Risch; Jorn Altmann; Li Guo; Alan Fleming; Costas Courcoubetis

  1. By: Bernard Lapeyre (CERMICS); J\'er\^ome Lelong (LJK)
    Abstract: Adaptive Monte Carlo methods are powerful variance reduction techniques. In this work, we propose a mathematical setting which greatly relaxes the assumptions needed by for the adaptive importance sampling techniques presented by Arouna in 2003. We establish the convergence and asymptotic normality of the adaptive Monte Carlo estimator under local assumptions which are easily verifiable in practice. We present one way of approximating the optimal importance sampling parameter using a randomly truncated stochastic algorithm. Finally, we apply this technique to the valuation of financial derivatives and our numerical experiments show that the computational time needed to achieve a given accuracy is divided by a factor up to 5.
    Date: 2010–01
  2. By: José Martins Caetano (Department of Economics, University of Évora); António Bento Caleiro (Department of Economics, University of Évora)
    Abstract: The risk perceived by investors is crucial in the decision to invest, in particular when it concerns a foreign country. The investment risk associated is a multi-faceted element given that it reflects many aspects that are relevant to (foreign) investors, such as the level of transparency, corruption, rule of law, governance, etc. In this paper we consider the level of economic freedom, as provided by the ?Heritage Foundation?, for the most recent years, in order to analyse how is this measure of risk related to the inward foreign direct investment performance index, as provided by the UNCTAD. Given the subjectivity of risk an appropriate methodology consists on using fuzzy logic clustering, which is applied in the paper in order to verify how different the MENA region is from the set of EU-member states. The results show that economic freedom and inward FDI are positively associated, in particular in the cluster of countries that present a higher economic freedom. Of particular interest is the result that some MENA countries belong to the same cluster of most of the EU-countries.
    Keywords: Economic Freedom, European Union (EU) countries, Foreign Direct Investment, Fuzzy Clustering, Institutions, Middle East North Africa (MENA) countries
    JEL: C49 E22 F21
    Date: 2009
  3. By: Sorin Vlad; Paul Pascu; Nicolae Morariu
    Abstract: The paper discusses the main ideas of the chaos theory and presents mainly the importance of the nonlinearities in the mathematical models. Chaos and order are apparently two opposite terms. The fact that in chaos can be found a certain precise symmetry (Feigenbaum numbers) is even more surprising. As an illustration of the ubiquity of chaos, three models among many other existing models that have chaotic features are presented here: the nonlinear feedback profit model, one model for the simulation of the exchange rate and one application of the chaos theory in the capital markets.
    Date: 2010–01
  4. By: Roehlano M. Briones (Philippine Institute for Development Studies)
    Abstract: For the Philippines, quantitative policy analysis should incorporate regional differences in welfare and economic structure, which arise partly from geographic constraints. However, existing CGE models offer limited analysis of regional effects or national impacts of region-specific interventions, owing to the absence of key regional data. This study formulates a regional CGE model that overcomes these limitations. Applications of the model yield the following results- i) completion of the tariff reform program in agriculture will contract some import-competing sectors in lagging regions, but improve welfare across all regions; ii) massive investments in marketing infrastructure promise bigger pay-offs, though with a trade-off between the size and spread of welfare gains across regions; iii) combining trade reform with marketing infrastructure investments mitigate some of the contractionary effects from the former; however the absence of welfare synergies suggest that the two sets of policies can be pursued independently.
    Keywords: computable general equilibrium, regional economics, agricultural development, marketing infrastructure, trade liberalization, welfare impact
    JEL: C68 M39 Q18 R13 R58
    Date: 2010–01
  5. By: Michael Ludkovski
    Abstract: We study optimal behavior of energy producers under a CO_2 emission abatement program. We focus on a two-player discrete-time model where each producer is sequentially optimizing her emission and production schedules. The game-theoretic aspect is captured through a reduced-form price-impact model for the CO_2 allowance price. Such duopolistic competition results in a new type of a non-zero-sum stochastic switching game on finite horizon. Existence of game Nash equilibria is established through generalization to randomized switching strategies. No uniqueness is possible and we therefore consider a variety of correlated equilibrium mechanisms. We prove existence of correlated equilibrium points in switching games and give a recursive description of equilibrium game values. A simulation-based algorithm to solve for the game values is constructed and a numerical example is presented.
    Date: 2010–01
  6. By: U-Primo E. Rodriguez (Philippine Institute for Development Studies)
    Abstract: This paper examines the economy-wide impacts of a Free Trade Area of the Asia Pacific (FTAAP) on the Philippine economy. In particular, it uses an applied general equilibrium model to determine the effects of alternative scenarios on aggregate and sectoral outputs, consumption, and international trade. The paper also compares the FTAAP to reforms which are confined to the ASEAN plus 3 and to a broader set of tariff changes that covers all the trading partners of the Philippines. The findings of the paper are as follows. First, the FTAAP is likely to benefit the Philippines in the form of higher aggregate output and employment. However, such gains are not projected for all industries as the simulation results indicate declines in the outputs of activities related to rice and corn. Second, the benefits from the FTAAP are likely to come more from the removal of tariffs on nonagriculture products. Finally, the aggregate gains from the FTAAP are larger than an arrangement which is limited to ASEAN plus 3 countries. However, the differences in the impacts do not appear to be very large.
    Keywords: applied general equilibrium models, Asia Pacific Economic Cooperation, free trade area, international trade, Philippines
    JEL: F13 E27 E21
    Date: 2010–01
  7. By: Jorn Altmann; Zelalem Berhanu Bedane (TEMEP, School of Industrial and Management Engineering College of Engineering, Seoul National University)
    Abstract: This paper applies the theory of social networks to P2P systems, creating a social-network-based P2P network topology formation algorithm for file sharing. The algorithm extends the Gnutella P2P file sharing technology, which uses super nodes for searching and for relaying shared files between network leafs that are located behind Firewalls/NATs. The topology of the P2P network is based on the actual social relationship between peers (users). The idea is that users are willing to contribute their resources to a P2P network if they know that their resources directly benefit their friends and family. Following this approach, free-riding in P2P networks will be avoided by not providing better-than-basic service if peers do not reveal their social relationships. Within the paper, we simulate the proposed topology formation algorithm, considering the real characteristics of the Gnutella P2P network and realistic network topologies. The simulation shows the effectiveness of the topology formation algorithm and the high utility of nodes under this new file sharing scheme.
    Keywords: social network analysis, peer-to-peer, economics, network science, free- riding, file sharing, sociology, NATs, utility, Gnutella, Firewalls, network economics, incentive mechanisms
    JEL: C13 C14 C61 C62 C63 D01 D02 D82 D85 L96 L96 M21
    Date: 2010–01
  8. By: Gregory Corcos (Norwegian School of Economics and Business Administration); Massimo Del Gatto ("G.d'Annunzio" University and CRENoS); Giordano Mion (LSE, Department of Geography, NBB, CEP and CEPR); Gianmarco I.P. Ottaviano (KITeS, Bocconi Univerity - Milan - Italy)
    Abstract: We discuss how standard computable equilibrium models of trade policy can be enriched with selection effects without missing other important channels of adjustment. This is achieved by estimating and simulating a partial equilibrium model that accounts for a number of real world effects of trade liberalisation: richer availability of product varieties; tougher competition and weaker market power of rms; better exploitation of economies of scale; and, of course, efficiency gains via the selection of the most efficient firms. The model is estimated on E.U. data and simulated in counterfactual scenarios that capture several dimensions of European integration. Simulations suggest that the gains from trade are much larger in the presence of selection effects. Even in a relatively integrated economy as the E.U., dismantling residual trade barriers would deliver relevant welfare gains stemming from lower production costs, smaller markups, lower prices, larger rm scale and richer product variety. We believe our analysis provides enough ground to support the inclusion of rm heterogeneity and selection effects in the standard toolkit of trade policy evaluation.
    Keywords: European integration, firm-level data, firm selection, gains from trade, total factor productivity
    JEL: F12 R13
    Date: 2009–03
  9. By: Claudiu Tiberiu Albulescu (CRIEF, University of Poitiers)
    Abstract: The aim of this paper is to develop an aggregate stability index for the Romanian financial system, which is meant to enhance the set of analysis used by authorities to assess the financial system stability. The index takes into consideration indicators related to financial system development, vulnerability, soundness and also indicators which characterise the international economic climate. Another purpose of our study is to forecast the financial stability level, using a stochastic simulation model. The outcome of the study shows an improvement of the Romanian financial system stability during the period 1999-2007. The constructed aggregate index captures the financial turbulences periods like 1998-1999 Romanian banking crisis and 2007 subprime crisis. The forecasted values of the index show a deterioration of financial stability in 2009, influenced by the estimated decline of the financial and economic activity.
    Keywords: financial stability, aggregate financial stability index, forecasting systemic stability, stochastic simulation model
    JEL: C43 C51 C53
    Date: 2009
  10. By: U-Primo E. Rodriguez; Liborio S. Cabanilla (Philippine Institute for Development Studies)
    Abstract: The paper examines the effect of an RP-US FTA in the Philippine agricultural sector. Using an Applied General Equilibrium (AGE) Model, it analyzes the impact of the removal of tariffs on imports from the US on the various commodities in agriculture and food processing. The simulation results suggest that most of the commodities in these sectors experience gains in output and employment following the removal of Philippine tariffs on its imports from the U.S. It also shows that the benefits of agriculture and food processing from the FTA are larger with a comprehensive removal of tariffs.
    Keywords: Philippine agriculture production, consumption and employment, foreign and domestic markets, tariff change and removal, economic modelling
    JEL: Q17 Q13 Q10
    Date: 2010–01
  11. By: David Vanzetti; Pham Lan Huong (Australian National University and Central Institute for Economic Management)
    Abstract: Vietnam faces alternative options in opening its economy to trade. It is about to join the World Trade Organization; as a member of the ASEAN Free Trade Area it is contemplating extending the regional trade area to include China, Korea and Japan; and it has recently concluded a bilateral agreement with the United States. Opening up to trade is a two-edged sword, with the beneficial effects of improved market access and resource allocation liable to be partially or totally offset by adverse terms of trade effects and significant, albeit one-off, cost of structural adjustment. Simulations of unilateral, bilateral, regional and multilateral liberalization reform and a tariff harmonization scenario are undertaken using a general equilibrium model, GTAP. Results indicate that significant welfare benefits could be obtained from unilateral liberalization without the need to negotiate with others. Harmonization of tariffs at the current average also shows to be beneficial in raising tariff revenues with little need for adjustment. The extension of AFTA brings moderate benefits, as does a multilateral reform which reduces applied tariffs by 50 per cent. There are only limited gains in the agricultural and resources sectors, as these major exports face low tariff barriers. However, the market for Vietnam's textiles and apparel is crucially important.
    Keywords: Vietnam, trade, WTO negotiations
    JEL: F13 Q17
    Date: 2010–01
  12. By: Dang Minh Quan; Jorn Altmann; Laurence T. Yang (School of Information Technology, International University in Germany)
    Abstract: This chapter describes the error recovery mechanisms in the system handling the Grid-based workflow within the Service Level Agreement (SLA) context. It classifies the errors into two main categories. The first is the large-scale errors when one or several Grid sites are detached from the Grid system at a time. The second is the small-scale errors which may happen inside an RMS. For each type of error, the chapter introduces a recovery mechanism with the SLA context imposing the goal to the mechanisms. The authors believe that it is very useful to have an error recovery framework to avoid or eliminate the negative effects of the errors.
    Keywords: Service Level Agreements (SLA), error recovery, Grid computing, resource allocation, workflow management, error classification, simulation
    JEL: C15 C61 C63 L21 L86 M21
    Date: 2010–01
  13. By: Marcel Risch; Jorn Altmann (International University in Germany, School of Information Technology)
    Abstract: Due to the few computing resource planning options currently available in Grid computing, capacity planning, an old discipline for analyzing resource purchases, is simple to perform. However, once a commercial computing Grid is established, which provides many different resource types at variable prices, capacity planning will become more complex and the user will require support for handling this difficult process. The support could come from an online Grid Capacity Planning Service, which helps users with little IT expertise to make use of the Grid in a cost-effective manner. This Grid Capacity Planning Service is a stand-alone service, enabling companies to outsource their capacity planning task. This paper describes the Grid Capacity Planning Service and demonstrates the workings of the service through simulations.
    Keywords: Grid Economics, Grid Capacity Planning, Service-Oriented, Computing, Grid Computing, Resource Allocation, Utility Computing
    JEL: C13 C15 C44 C61 C62 C63 D40 D44 D81 L86 M21
    Date: 2010–01
  14. By: Héctor Cañada; Rosario Romera
    Abstract: A modeling approach to treat noisy engineering systems is presented. We deal with controlled systems that evolve in a continuous-time over finite time intervals, but also in continuous interaction with environments of intrinsic variability. We face the complexity of these systems by introducing a methodology based on Stochastic Differential Equations (SDE) models. We focus on specific type of complexity derived from unpredictable abrupt and/or structural changes. In this paper an approach based on controlled Stochastic Differential Equations with Markovian Switchings (SDEMS) is proposed. Technical conditions for the existence and uniqueness of the solution of these models are provided. We treat with nonlinear SDEMS that does not have closed solutions. Then, a numerical approximation to the exact solution based on the Euler- Maruyama Method (EM) is proposed. Convergence in strong sense and stability are provided. Promising applications for selected industrial biochemical systems are showed.
    Keywords: markov chains, stochastic dynamical systems, numerical approaches for SDE
    Date: 2009–06
  15. By: Kiyosi Hirosima (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The rise in marital fertility in East Asian societies with very low fertility has been reported through analyses using the age-specific marital fertility rate (AMFR). Though the measure is often considered related to the average number of children married women have (CMF), we demonstrated that such an interpretation is often erroneous (AMFR problem) and valid only under limited conditions in more or less controlled fertility, a fact that has been known by some researchers. We conducted numerical simulations based on a simple mathematical model. Holding completed marital fertility (CMF) constant, tempo changes in the age-specific marriage rate and in the duration-specific marital fertility produce a parallel and opposite change in the AMFR, respectively. Note that the former is in the opposite direction of demographic translation. This means that a change in the AMFR caused by such tempo changes may cancel the change in the CMF thus leading to an erroneous interpretation. We should be careful in using the AMFR when the age at marriage or the tempo in duration-specific marital fertility changes or differs notably. Hence, the observed rise in the AMFR should be interpreted after subtracting the enormous effect by such tempo changes so as to avoid exaggeration of the marriage rate decline and negligence of marital fertility decline. This problem may even apply to some developing countries or Western societies.
    JEL: J1 Z0
    Date: 2010–01
  16. By: Dang Minh Quan; Jorn Altmann (School of Information Technology, International University in Germany)
    Abstract: In the Grid Computing environment, many users need the results of their calculations within a specific period of time. Those users are willing to pay for getting their work completed on time. However, this requirement must be agreed on in a Service Level Agreement (SLA) by both, the user and the Grid provider, before the application is executed. In order to finish the workflow on time, sub-jobs of the workflow must be distributed to Grid resources. To free users from assigning sub-jobs of the workflow, it is necessary to have a SLA workflow broker. We introduce a set of business models that are based on incentive structure for users to consume the HPCC services, and for brokers to perform efficiently. The business model also leads to several economic issues. In particular, there is asymmetric information regarding the execution environment. The asymmetric information may have negative effect on the business relation between the broker and the user. We will analyze this effect. We also propose some possible solutions for the asymmetric information issue. They include the pricing/fining policy of the broker and the negotiation strategy between users and brokers.
    Keywords: Service Level Agreements (SLA), Business Model, Workflow Management, Resource Allocation, Optimization, Information Asymmetry, Negotiation
    JEL: C02 C61 C63 C78 D46 D82 D86 L11 L86 M21
    Date: 2010–01
  17. By: Marcel Risch; Jorn Altmann; Li Guo; Alan Fleming; Costas Courcoubetis (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)
    Abstract: Within this paper, we present the GridEcon Platform, a testbed for designing and evaluating economics-aware services in a commercial Cloud computing setting. The Platform is based on the idea that the exact working of such services is difficult to predict in the context of a market and, therefore, an environment for evaluating its behavior in an emulated market is needed. To identify the components of the GridEcon Platform, a number of economics-aware services and their interactions have been envisioned. The two most important components of the platform are the Marketplace and the Workflow Engine. The Workflow Engine allows the simple composition of a market environment by describing the service interactions between economics-aware services. The Marketplace allows trading goods using different market mechanisms. The capabilities of these components of the GridEcon Platform in conjunction with the economics-aware services are described in this paper in detail. The validation of an implemented market mechanism and a capacity planning service using the GridEcon Platform also demonstrated the usefulness of the GridEcon Platform.
    Keywords: Cloud computing, Grid computing, marketplace for computing resources, market-based resource allocation, service-oriented architectures, utility computing,market emulation tool, market mechanism
    JEL: C15 C51 C53 C61 C63 C65 D40 D44 L11 L21 L22 L86 M21
    Date: 2010–01

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