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on Computational Economics |
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Issue of 2010‒04‒11
six papers chosen by |
| By: | Gary S. Anderson |
| Abstract: | This paper describes a set of algorithms for quickly and reliably solving linear rational expectations models. The utility, reliability and speed of these algorithms are a consequence of 1) the algorithm for computing the minimal dimension state space transition matrix for models with arbitrary numbers of lags or leads, 2) the availability of a simple modeling language for characterizing a linear model and 3) the use of the QR Decomposition and Arnoldi type eigenspace calculations. The paper also presents new formulae for computing and manipulating solutions for arbitrary exogenous processes. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2010-13&r=cmp |
| By: | Mele, Antonio |
| Abstract: | This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques a la Marcet and Marimon (2009) to problems with hidden actions. The method has many advantages with respect to promised utilities approach (Abreu, Pearce and Stacchetti (1990)): it is a significant improvement in terms of simplicity, tractability and computational speed. Solutions can be easily computed for hidden actions models with several endogenous state variables and several agents, while the promised utilities approach becomes extremely difficult and computationally intensive even with just one state variable or two agents. Several numerical examples illustrate how this methodology outperforms the standard approach. |
| Keywords: | repeated moral hazard; recursive Lagrangean; collocation method |
| JEL: | D86 C63 D82 C61 |
| Date: | 2010–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:21741&r=cmp |
| By: | Manfred Gilli; Stefan Große; Enrico Schumann |
| Abstract: | The Nelson–Siegel–Svensson model is widely-used for modelling the yield curve, yet many authors have reported ‘numerical difficulties’ when calibrating the model. We argue that the problem is twofold: firstly, the optimisation problem is not convex and has multiple local optima. Hence standard methods that are readily available in statistical packages are not appropriate. We implement and test an optimisation heuristic, Differential Evolution, and show that it is capable of reliably solving the model. Secondly, we also stress that in certain ranges of the parameters, the model is badly conditioned, thus estimated parameters are unstable given small perturbations of the data. We discuss to what extent these difficulties affect applications of the model. |
| Date: | 2010–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:com:wpaper:031&r=cmp |
| By: | Mullen, Katharine M.; Ardia, David; Gil, David L.; Windover, Donald; Cline, James |
| Abstract: | This article describes the R package DEoptim which implements the differential evolution algorithm for the global optimization of a real-valued function of a real-valued parameter vector. The implementation of differential evolution in DEoptim interfaces with C code for efficiency. The utility of the package is illustrated via case studies in fitting a Parratt model for X-ray reflectometry data and a Markov-Switching Generalized AutoRegressive Conditional Heteroskedasticity (MSGARCH) model for the returns of the Swiss Market Index. |
| Keywords: | global optimization; evolutionary algorithm; differential evolution; R software |
| JEL: | C51 C61 C22 C15 C80 |
| Date: | 2009–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:21743&r=cmp |
| By: | Diego Martinez Lopez (Department of Economics, Universidad Pablo de Olavide); A. Jesus Sanchez Fuentes (Department of Economics, Universidad Pablo de Olavide) |
| Abstract: | This paper studies the sensitivity of provision of public inputs to changes in the specification of technology and consumer preferences. We consider a simple model in which the government, with recourse to three different tax settings (a lump-sum tax, a tax on labour and a tax on economic profit), provides firms with certain productive services. We focus on the numerical results coming from the government optimization problem. We look at several specific cases in which the returns to scale in the production function emerges as a critical issue. Our …findings also address the impact of changes in output elasticity, in consumer preferences and in the number of households on the levels of public input and utility. |
| Keywords: | firm-augmenting public input, factor-augmenting public input, optimal provision |
| JEL: | H21 H3 H41 H43 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:10.04&r=cmp |
| By: | Hunt, Gary L.; Mueller, Richard E. |
| Abstract: | Higher after-tax returns to skill in U.S. states compared to Canadian provinces have raised the issue that higher skilled Canadian workers especially will find migration to the U.S. economically attractive, and especially so after the North American Free Trade Agreement (NAFTA), provisions of which facilitate such cross-country migration through special visas. In this study we develop, estimate, and simulate a nested logit model of migration among 59 Canadian and U.S. sub-national areas using over 70,000 microdata observations on workers across all deciles of the skill distribution obtained from the U.S. and Canadian censuses of 2000/2001 Combining microdata on individual workers with area data, including estimates of after-tax returns by skill decile based on standardized wage distributions and large scale microsimulation tax models for Canadian provinces and U.S. states, we are able to consider the effects of tax policy differences across countries on worker migration. Our ability to identify highly skilled individuals using these data enables us to simulate the effects of changes to taxes (under balanced budget conditions) on the migration propensities of individuals as well as the magnitude of the aggregate migration streams. Simulations suggest that increasing Canadian after-tax returns to skill and implementing fiscal equalization (reducing the average Canadian tax rate to the average U.S. level with offsetting expenditure reductions to maintain budget neutrality) would effectively reduce southward migration and especially so amongst highly skilled workers. The required reductions in tax rates and public expenditures are relatively large however and therefore would be expected to raise other substantial public policy concerns. |
| Keywords: | International migration, Returns to skill, Taxes, Regional integration |
| JEL: | F22 H24 H71 J24 J31 |
| Date: | 2010–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:ubc:clssrn:clsrn_admin-2010-11&r=cmp |