New Economics Papers
on Computational Economics
Issue of 2010‒11‒13
sixteen papers chosen by

  1. Forecasting Malaysian Exchange Rate: Do Artificial Neural Networks Work? By Chan, Tze-Haw; Lye, Chun Teck; Hooy, Chee-Wooi
  2. Measuring multifunctional (agritouristic) characterization of the territory By Bassi, Ivana; De Poi, P.
  3. The interface between policy reforms, household livelihoods and farm-nonfarm linkages: insights from a village economy in rural Ethiopia By Ferede T.
  4. The Impact of Trade Liberalization on Regional Growth and Poverty in Tunisia By Rim Chatti; Faycel Zidi
  5. Mean-Variance & Mean-VaR Portfolio Selection: A Simulation Based Comparison in the Czech Crisis Environment By Radovan Parrák; Jakub Seidler
  6. Where is it Cheapest to Cut Carbon Emissions? By Stern, David I.; Lambie, N. Ross
  7. El modelo HRV para expansión óptima de redes de transmisión: una aplicación a la red eléctrica de Ontario By Rosellon, Juan; Tregear, Juan; Zenon, Eric
  8. An Empirical Study of Inter-Vehicle Communication Performance Using NS-2 By Jung, Jaeyoung; Chen, Rex; Jin, Wenlong; Jayakrishnan, R.; Regan, Amelia C
  9. Hubbert's Oil Peak Revisited by a Simulation Model By Pierre-Noel Giraud; Aline Sutter; Timothée Denis; Cédric Léonard
  10. Industrial ecology in policy making: What is achievable and what is not? By Pothen, Frank
  11. Simulation Evaluation of Green Driving Strategies Based on Inter-Vehicle Communications By Yang, Hao; Yuan, Daji; Jin, W L; Saphores, Jean-Daniel M
  12. Impacts of socio-economic factors on farm household dynamics - empirical survey data in an agent-based model application By Schnicke, Hauke Joachim
  13. Sequential versus simultaneous application of multi-objective optimization and multicriteria decision making: an empirical investigation By Sörensen K.; Springael J.; Busschaert S.
  14. Alternative Policies for US Economic Recovery By Byron Ganges
  15. Knowledge spillovers and the timing of R&D policy By Geir H. Bjertnæs, Tom-Reiel Heggedal and Karl Jacobsen
  16. The Personal Travel Assistant (PTA): Measuring the dynamics of human travel behavior By Recker, W.; Marca, J.; Rindt, C.; Dechter, R.

  1. By: Chan, Tze-Haw; Lye, Chun Teck; Hooy, Chee-Wooi
    Abstract: Being a small and open economy, the stability and predictability of Malaysian foreign exchange are crucially important. However, despite the general failure of conventional monetary models, foreign exchange misalignments and authority intervention have both caused the forecasting process an uneasy task. The present paper employs the monetary-portfolio balance exchange rate model and its modified version in the analysis. We then compare two Artificial Neural Networks (ANNs) estimation procedures (MLFN and GRNN) with random walk (RW) in the modeling-prediction process of RM/USD during the post-Bretton Wood era (1990M1-2008M8). The out-of-sample forecasting assessment reveals that the ANNs have outperformed the RW, which in particular, the MLFNs outperform GRNNs where as the latter outperform the RW models with consistency in both the exchange rate models by all evaluation criteria. In addition, the findings also show that the modified model has superior forecasting performance than the first model. In brief, economic fundamentals are vital in forecasting and explaining the RM/USD exchange rate. The findings are beneficial in policy making, investment modeling as well as corporate planning.
    Keywords: Artificial Neural Networks; Forecasting; modified monetary-portfolio balance model; RM/USD
    JEL: C53 C45 F31
    Date: 2010–04–06
  2. By: Bassi, Ivana; De Poi, P.
    Abstract: The reform of EU agricultural policy set up by Agenda 2000 was intended to develop a competitive, sustainable and multifunctional agriculture, through instruments of both the market and income support policy and the rural development policy. To design strategies and actions while simultaneously considering the multifunctional character of farming and of rural areas, it is necessary to measure the multifunctionality with reference to the sectorial and territorial dimensions. This research represents a methodological contribution to the analyses whose aim it is to describe the multifunctional character of the territory. The availability of data regarding the functions performed by farms, the private or public nature of goods produced and the location of the business, suggested focusing our research on agritourism enterprises at community level. Data was analyzed using the fuzzy clustering algorithm Fanny, which allowed us to test a procedure in order to create a partition in which the communities (statistical units) of each group were functionally similar and geographically close to each other. Furthermore, fuzzy clustering allowed us not only to classify the units into homogeneous groups, but also offered the possibility of identifying the membership degrees of each unit. As to planning all this information is important in designing sectorial and regional development paths differing with regards to each cluster and in identifying any particular intracluster properties at which to target specific projects. The last one is the case of those communities that, having the characteristics of different groups, can be made to migrate towards one cluster rather than another through specific planning, consistent with the objectives of sectorial and territorial policy.
    Keywords: Multifunctional characterization, spatial proximity, fuzzy clustering., Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Food Consumption/Nutrition/Food Safety, Labor and Human Capital,
    Date: 2010–10–27
  3. By: Ferede T.
    Abstract: After two decades of agricultural-led development strategies since the early 1990s, economic growth has been erratic, land degradation has worsened, and the country has failed to enjoy significant drop in the number of food insecure population. By using a complementary qualitative and quantitative analysis, this study shades some insights regarding the effects of policy reforms on household livelihoods in rural Ethiopia. The qualitative results indicate that agricultural productivity declined and households experienced a downward livelihood trajectories. Farm households have stuck in a stagnant and low productivity agriculture as output growth is largely driven by employment expansion with limited or no productivity gain. Simulation results based on the village computable general equilibrium (CGE) model indicate that growth in agricultural productivity does not promote the development of the nonfarm sector in the form of labour-intensive small businesses. In settings characterized by low productivity, complementary reforms are required to trigger growth and to improve household livelihoods. The growth and employment linkages are strengthened when agricultural growth is driven by a set of mutually reinforcing policy reforms.
    Date: 2010–08
  4. By: Rim Chatti (Ministère des Finances du Québec, Canada); Faycel Zidi
    Abstract: The paper focuses on how trade reform affected regional growth during the stage of economic transformation. The main question addressed is whether progressive trade liberalization has an impact on regional economic growth and poverty and reduces regional disparities amongst the Tunisian regions. The paper explores the factors behind such transformations. In order to achieve this goal the paper is divided into 3 sections. The first section briefly describes the data and model underlying the study. The second section presents the simulation results on regional growth and poverty. Simulation results reveal that all the regions experience better economic performance with freer-trade, but poverty outcomes differ from one region to another. The concluding remarks are presented in the last section.
    Date: 2010–11
  5. By: Radovan Parrák (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jakub Seidler (Czech National Bank; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper focuses on two methods for optimum portfolio selection. We compare Mean-Variance method with Mean-VaR method by the means of investment simulation, based on Czech financial market data from turbulent market periods of the year 2007 and the year 2008. We compare both strategies, basing on measurements of relative and absolute profitability of both strategies in crisis periods. The results indicate that both strategies were relatively profitable in both simulation periods. As a consequence of our results, it seems that it is worth to adhering investment decisions to outputs of optimisation algorithms of both methods. Moreover, we consider Mean-VaR strategy to be safer in turbulent times.
    Keywords: portfolio optimization, investment strategy, Mean-Variance, Mean-Var
    JEL: C52 G11
    Date: 2010–11
  6. By: Stern, David I.; Lambie, N. Ross
    Abstract: The relative cost of carbon emissions reductions across regions depends on whether we measure cost by marginal or total cost, private or economy-wide cost, and using market or purchasing power parity exchange rates. If all countries are on the same marginal carbon abatement cost curve then lower marginal costs of abatement are associated with higher energy intensities and higher total costs of abatement in achieving proportional cuts in emissions, equal emissions per capita, or common global carbon price targets. We test this conjecture using the results of the GTEM computable general equilibrium model as presented in the climate change economics review conducted by the Australian Treasury Department. Rankings of countries by costs do differ depending on whether marginal or total cost is used. But some regions, including OPEC and the former USSR, have high marginal costs and high emissions intensities and, therefore, high total costs and others like the EU relatively low marginal and total costs. Under a global emissions trading regime real economy-wide costs of abatement are higher in developing economies with currencies valued below purchasing power parity and large differences between private and economy-wide costs such as India contributing to the high GDP losses experienced in those countries.
    Keywords: Climate change, costs, developing countries, computable general equilibrium, Environmental Economics and Policy, Q52, Q54,
    Date: 2010–06
  7. By: Rosellon, Juan; Tregear, Juan; Zenon, Eric
    Abstract: This paper presents an application of a mechanism that provides incentives to promote transmission network expansion in the electricity system of the Ontario province. Such a mechanism combines a merchant approach with a regulatory approach. It is based on the rebalancing of a two-part tariff within the framework of a wholesale electricity market with nodal pricing. The expansion of the network is carried out through auctions of financial transmission rights for congested links. The mechanism is tested for a simplified transmission grid with ten interconnected zones, ten nodes, eleven lines and seventy eight generators in the Ontario province. The simulation is carried out for both peak and non-peak scenarios. Considering Laspeyres weights, the results show that that prices converge to the marginal cost of generation, the congestion rent decreases, and the total social welfare increases.
    Keywords: Keywords: Electricity transmission; financial transmission rights (FTRs); incentive regulation; loop-flow problem; nodal prices; Ontario
    JEL: L51 L91 L94 Q40
    Date: 2010–11
  8. By: Jung, Jaeyoung; Chen, Rex; Jin, Wenlong; Jayakrishnan, R.; Regan, Amelia C
    Abstract: In recent years, there has been increasing interest in inter-vehicle communications (IVC) based on wireless networks to collect and distribute traffic information in various Intelligent Transportation Systems applications. In this paper, we study the performance of IVC under various traffic and communication conditions by means of simulation analysis. We consider impacts of shock waves, transportation network, traffic densities, transmission ranges, and multiple information sources. We used a state-of-the-art communication network simulator ns-2 to measure the probability of success (success rate) and message delivery ratio (MDR) for flooding-based IVC communication. For reasonable realism in the deployment scenario, we assume that only a partial set of vehicles on the road are equipped with communication devices, according to the market penetration rate. A Monte-Carlo simulation method is used, with repeated random sampling of IVC-equipped vehicles. The results indicate how these parameters can impact the performance of IVC communications. By comparing the flooding based approach (theoretical and simulation) and simulation results using AODV (Ad Hoc On-Demand Distance Vector), we conclude the importance of traffic environment and network protocol in determining the MDR for IVC communication.
    Date: 2010–08–01
  9. By: Pierre-Noel Giraud (CERNA - Centre d'économie industrielle - Mines ParisTech); Aline Sutter (chercheur indépendant - Casa de Velázquez); Timothée Denis (chercheur indépendant - Casa de Velázquez); Cédric Léonard (chercheur indépendant - Casa de Velázquez)
    Abstract: As conventional oil reserves are declining, the debate on the oil production peak has become a burning issue. An increasing number of papers refer to Hubbert's peak oil theory to forecast the date of the production peak, both at regional and world levels. However, in our views, this theory lacks microeconomic foundations. Notably, it does not assume that exploration and production decisions in the oil industry depend on market prices. In an attempt to overcome these shortcomings, we have built an adaptative model, accounting for the behavior of one agent, standing for the competitive exploration-production industry, subjected to incomplete but improving information on the remaining reserves. Our work yields challenging results on the reasons for an Hubbert type peak oil, lying mainly "above the ground", both at regional and world levels, and on the shape of the production and marginal cost trajectories.
    Date: 2010
  10. By: Pothen, Frank
    Abstract: A diverse set of tools has been developed in Industrial Ecology to tackle the problems caused by human economic activity. These instruments include Life Cycle Assessment (LCA) and Material Flow Analysis (MFA). Especially LCA is now increasingly used in policy making. Design and Evaluation of policy measures necessitates careful weighing of costs and benefits. One has to consider the complex economic effects imposed by regulation, like costs for the industries affected by regulation, indirect effects on other industries and ecologically important rebound effects. This article discusses to what extent this evaluation is possible within LCA and MFA models. It is found that these models do not sufficiently incorporate the overall consequences of regulation and hence are not very suitable to measure the advantages or disadvantages of regulations. Therefore, adding economic aspects to Industrial Ecology models seems promising. In policy making, the effects imposed on the whole economy have to be captured, which calls for a general equilibrium framework. A Life Cycle based Computable General Equilibrium Model is proposed as a tool to assess the economic effects of regulation while remaining in life cycle thinking. --
    JEL: D58 Q50 Q57 Q58
    Date: 2010
  11. By: Yang, Hao; Yuan, Daji; Jin, W L; Saphores, Jean-Daniel M
    Abstract: Transportation system produces a large percentage of local pollutants including hydrocarbons (HC), carbon monoxide (CO), carbon dioxide from switching to alternative fuels, one measure would be to apply information and communication technologies to help us drive more smoothly so as to decrease pollutants emissions. This paper studies potential benefits of two green driving strategies based on inter-vehicle communication (IVC). Here green driving strategies are similar to intelligent speed adaptation , but we assume that an IVC-equipped vehicle is able to receive detailed trajectory information from other such vehicles with the help of IVC. For the purpose of evaluation, we integrate Newell’s car-following model and VT-Micro to establish a simulation platform. Market penetration rates of IVC-equipped vehicles and delivery delays of messages are two prominent features of IVC systems. We simulate stop-and-go traffic to calculate potential reductions in air pollutant emissions and fuel consumption under different market penetration rates and delivery delays. Results show that significant savings under frequent stop-and-go traffic conditions may be obtained with our strategies (HC: -88.3%, CO: -95.8%, NOx: -91.5%, CO2: -36.3%, Fuel Consumption: -71.3%) for the same travel time and almost the same overall travel distance. It is also shown that relatively large savings can be achieved even for a market penetration rate as low as 1% and communication delays larger than 2 minutes. In the future we will investigate environmental benefits of green driving strategies for more traffic scenarios and realistic communication scenarios.
    Keywords: Green Driving, Emissions, Fuel Consumption, VT-micro Emission Model
    Date: 2010–08–01
  12. By: Schnicke, Hauke Joachim
    Abstract: This paper addresses three issues of socio-economic factors of Hungarian farm households and their impacts on structural change. This concerns the role of age as a factor influencing the opportunity costs of labour, the impact of empirical age patterns on structural change, and the role of a varied probability of young farm successors entering into the farming business. Results of a farm household survey are integrated in simulation experiments with the agent-based model AgriPoliS which has been adapted to a Hungarian case study region. It could be shown that impediments of a flexible labour adjustment slow down structural change while the timing of persisting or exiting of farms highly depends on the age distribution of farmers.
    Keywords: socio-economic characteristics, farm households, empirical age patterns, farm succession, structural change, Community/Rural/Urban Development, Q18, Q14,
    Date: 2010–08
  13. By: Sörensen K.; Springael J.; Busschaert S.
    Abstract: The multi-objective optimization paradigm prescribes that a multi-objective optimization problem should be solved in two steps executed in sequence. First an approximation of the Pareto set is determined, that contains as many non-dominated solutions as possible. Secondly, a solution is chosen among these Pareto-optimal solutions. Although a large majority of papers on multi-objective optimization focuses exclusively on the first step, the second step is equally important: a decision maker generally can only implement a single solution and will need a way to select one according to his preferences. In this paper, we empirically test the soundness of the sequential approach to multiobjective optimization and provide convincing evidence that it can be outperformed by a simultaneous approach, in which the decision maker’s preferences are taken into account during the multi-objective optimization. To this end, we develop a simple tabu search algorithm for the multi-objective knapsack problem and combine it with the promethee multicriteria decision making method, both sequentially and simultaneously. The results of both approaches are compared both in terms of computing times and solution quality. The simultaneous approach is shown to strongly outperform the sequential one.
    Date: 2010–10
  14. By: Byron Ganges (Department of Economics, University of Hawaii at Manoa)
    Abstract: Recovery has begun in the United States and global economies. The US recovery is likely to be anemic by historical standards, raising the possibility that additional stimulus may be desirable. The President and Democrats in Congress have called for a “jobs bill,†and the Federal Reserve has demonstrated that it has a flexible toolkit for providing additional liquidity if deemed appropriate. The possible need for such stimulus will come up against the reality of an expanding public debt on the one hand, and inflationary concerns on the other. In this paper, I use simulations of the IHS Global Insight Model to assess the potential impact on the recovery path of alternative macro policies.
    Keywords: United States (US) recession and recovery; fiscal and monetary policy; econometric model forecast simulation; IHS Global Insight model.
    JEL: E37 E63 C53
    Date: 2010–02
  15. By: Geir H. Bjertnæs, Tom-Reiel Heggedal and Karl Jacobsen (Statistics Norway)
    Abstract: We analyze how knowledge spillovers influence the optimal timing of R&D policy. Using numerical simulations we find that optimal subsidies to R&D may be rising over time even when the returns to knowledge is decreasing. The optimal time profile of the subsidies is determined by the elasticity of scale in the R&D production function, which again depends on both the returns to knowledge and the returns to labor.
    Keywords: Innovation policy; R&D; Technological spillovers
    JEL: O32 O38
    Date: 2010–11
  16. By: Recker, W.; Marca, J.; Rindt, C.; Dechter, R.
    Abstract: The fundamental research question that was addressed with the project is whether a simple, continuously collected GPS sequence can be used to accurately measure human behavior. We applied Hybrid Dynamic Mixed Network (HDMN) modeling techniques to learn behaviors given an extended GPS data stream. This research project was designed to be an important component of a much larger effort. Unfortunately, the promised funding from a commercial sponsor for the larger project did not materialize, and so we did not have the resources to deploy a prototype personal travel assistant system. Work focused on developing the HDMN model. The learning and inference steps using the HDMN model were much slower than would be acceptable in an operational Personal Travel Assistant (PTA) system. We conducted research into alternate formulations that would improve convergence, handle noisy data more robustly and reduce the need for human intervention. This report describes how this project’s results fit into the larger research context, details the work done for this UCTC grant, and outlines future directions of research based on the findings of this project.
    Date: 2010–08–01

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