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on Computational Economics |
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Issue of 2011‒04‒16
twelve papers chosen by |
| By: | Kunimitsu, Yoji |
| Abstract: | The stock management of irrigation and drainage facilities was macro-economically evaluated. The recursive-dynamic CGE model was developed and used for policy simulation. Results demonstrated that effects of activity spread to other industries and total benefit calculated by the consumersâ surplus change was more than the total costs. |
| Keywords: | Computable General Equilibrium Model, Recursive dynamic model, Consumersâ surplus, Cost-benefit ratio, Agricultural and Food Policy, Community/Rural/Urban Development, Demand and Price Analysis, Production Economics, Public Economics, H30, Q12, Q14, Q18, |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea11:98132&r=cmp |
| By: | Roberto Casarin; Radu Craiu; Fabrizio Leisen |
| Abstract: | We propose a new class of interacting Markov chain Monte Carlo (MCMC) algorithms designed for increasing the efficiency of a modified multiple-try Metropolis (MTM) algorithm. The extension with respect to the existing MCMC literature is twofold. The sampler proposed extends the basic MTM algorithm by allowing different proposal distributions in the multipletry generation step. We exploit the structure of the MTM algorithm with different proposal distributions to naturally introduce an interacting MTM mechanism (IMTM) that expands the class of population Monte Carlo methods and builds connections with the rapidly expanding world of adaptive MCMC. We show the validity of the algorithm and discuss the choice of the selection weights and of the different proposals. We provide numerical studies which show that the new algorithm can perform better than the basic MTM algorithm and that the interaction mechanism allows the IMTM to efficiently explore the state space. |
| Keywords: | Interacting Monte Carlo, Markov chain Monte Carlo, Multiple-try Metropolis, Population Monte Carlo |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:ws110402&r=cmp |
| By: | Cissokho, Lassana |
| Abstract: | In this paper, I use a dynamic recursive computable general equilibrium to evaluate, for the economy of Senegal, the dynamic effects of an economic Partnership Agreement between West African countries and the European Union. In the simulation, the liberalization scheme is designed in a way similar to the interim agreement signed by Cote dâIvoire and Ghana. The effects described are the shifts from the baseline numbers. I found that the production of agricultural goods will decrease, affecting employment negatively, particularly in unskilled labor, since this sector is very labor intensive. In fact, employment drops at around 0.2 percent a year, during the simulation period (2012-2030). GDP grows on average by 1.9 percent a year. The effects of the economic partnership agreement closely mirror the results of a free trade agreement between Senegal and the European Union, implying that a customs union between West African countries is not necessary to reap of the benefit of the former. |
| Keywords: | Economic Partnership Agreement, Free Trade Area, Dynamic Computable General Economic, Crop Production/Industries, International Relations/Trade, |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea11:97622&r=cmp |
| By: | Carlos Leóm; Alejandro Reveiz |
| Abstract: | As a natural extension to León and Vivas (2010) and León and Reveiz (2010) this paper briefly describes the Cholesky method for simulating Geometric Brownian Motion processes with long-term dependence, also referred as Fractional Geometric Brownian Motion (FBM). Results show that this method generates random numbers capable of replicating independent, persistent or antipersistent time-series depending on the value of the chosen Hurst exponent. Simulating FBM via the Cholesky method is (i) convenient since it grants the ability to replicate intense and enduring returns, which allows for reproducing well-documented financial returns’ slow convergence in distribution to a Gaussian law, and (ii) straightforward since it takes advantage of the Gaussian distribution ability to express a broad type of stochastic processes by changing how volatility behaves with respect to the time horizon. However, Cholesky method is computationally demanding, which may be its main drawback. Potential applications of FBM simulation include market, credit and liquidity risk models, option valuation techniques, portfolio optimization models and payments systems dynamics. All can benefit from the availability of a stochastic process that provides the ability to explicitly model how volatility behaves with respect to the time horizon in order to simulate severe and sustained price and quantity changes. These applications are more pertinent than ever because of the consensus regarding the limitations of customary models for valuation, risk and asset allocation after the most recent episode of global financial crisis. |
| Keywords: | Montecarlo simulation, Fractional Brownian Motion, Hurst exponent, Long-term Dependence, Biased Random Walk. Classification JEL: C15, C53, C63, G17, G14. |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:648&r=cmp |
| By: | Fischer, Bart L.; Richardson, James W.; Outlaw, Joe L.; Allison, Marc S. |
| Abstract: | A Monte Carlo simulation model was constructed to analyze the economic feasibility of growing algae as a renewable fuel source. Increasing growth rates, pond water depth, oil content, and facility size are important for ensuring the economic viability of a commercial algae facility. |
| Keywords: | algae, renewable, fuel, feedstock, microalgae, Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Production Economics, Resource /Energy Economics and Policy, Risk and Uncertainty, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea11:98834&r=cmp |
| By: | Manfred GILLI (University of Geneva and Swiss Finance Institute); Enrico SCHUMANN (University of Geneva); Gerda CABEJ (University of Geneva); Jonela LULA (University of Geneva) |
| Abstract: | Hedge funds offer desirable risk-return profiles; but we also find high management fees, lack of transparency and worse, very limited liquidity (they are often closed to new investors and disinvestment fees can be prohibitive). This creates an incentive to replicate the attractive features of hedge funds using liquid assets. We investigate this replication problem using monthly data of CS Tremont for the period of 1999 to 2009. Our model uses historical observations and combines tracking accuracy, excess return, and portfolio correlation with the index and the market. Performance is evaluated considering empirical distributions of excess return, final wealth and correlations of the portfolio with the index and the market. The distributions are compiled from a set of portfolio trajectories computed by a resampling procedure. The nonconvex optimization problem arising from our model specification is solved with a heuristic optimization technique. Our preliminary results are encouraging as we can track the indices accurately and enhance performance (e.g. have lower correlation with equity markets). |
| Keywords: | Hedge Funds, Hedge Fund Replication, Asset Allocation, Portfolio Optimization, Optimization Heuristics, Drawdown |
| JEL: | G11 C61 C63 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1022&r=cmp |
| By: | Alistair Dieppe (European Central Bank, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.); Alberto González Pandiella (European Central Bank, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.); Alpo Willman (European Central Bank, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | The model presented here is a New estimated medium-scale Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenarios analysis at the European Central Bank. The model has a tight theoretical structure which allows for non-unitary elasticity of substitution, non-constant augmenting technical progress and heterogeneous sectors with differentiated price and income elastiticites of demand across sectors. Furthermore, it has the explicit inclusion of expectations on the basis of three optimising private sector decision making units: i.e. firms, trade unions and households, where output is in the short run demand-determined and monopolistically competing firms set prices and factor demands. Labour is indivisible and monopoly-unions set wages and households make consumption/saving decisions. We assume agents optimise under limited information where each agent knows only the parameters related to his/her optimization problem. Therefore we estimate with GMM, which implicitly assumes limited information boundedly rational expectations. In this paper we provide some simulation results under the assumption of model-consistent rational expectations, we show that there is some heterogeneity across countries and that the reactions of the economies to shocks depends strongly on whether the shocks are pre-announced, announced and credible or unannounced and uncredible. JEL Classification: C51, C6, E5. |
| Keywords: | Macro model, Open-economy macroeconomics, Rational expectations. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111315&r=cmp |
| By: | Du Caicai; Muysken Joan; Sleijpen Olaf (METEOR) |
| Abstract: | We model a three-pillar pension system and analyse in this context the impact of the financial crisis on the aggregate economy, using an overlapping generations model where individuals live for two periods. The system consists of (1) a PAYG pension system, (2) a Defined Benefit pension fund, and (3) private savings. We show that in this pension system the impact of the financial crisis on the economy is mitigated in case the funded pension funds have invested in more risk averse assets and savings are invested in more risky assets. In order to illustrate the working of the model with respect to the impact of the financial crisis, both in terms of size and development over time, we provide simulation results for the Netherlands. We argue that the lesson from the financial crisis is that pension funds should always invest in relatively risk-free assets, while private savings can be invested in more risky assets. |
| Keywords: | macroeconomics ; |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2011020&r=cmp |
| By: | Jones, Jason; Carlberg, Jared; Pendell, Dustin L. |
| Abstract: | The research reported in this paper created an epidemiological foot-and-mouth disease (FMD) spread model for Ontario. Disease simulations were constructed to reflect three levels of the cattle identification and movement recording system. Outputs generated by the epidemiological model are used to calculate the direct disease control costs of a FMD outbreak. Welfare effects caused by a FMD outbreak are also calculated for each level of cattle traceability using an equilibrium displacement model. Parameter sensitivity was tested for both the epidemiological and economic model results. It is found that the benefits to the beef cattle industry of increasing the ability to trace direct animal contacts during a FMD disease outbreak in Ontario are less than the lowest annual cost estimate of a cattle traceability system as estimated by Agriculture and Agri-Food Canada. |
| Keywords: | NAADSM, disease spread model, equilibrium displacement model, traceability, Agribusiness, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Livestock Production/Industries, Marketing, |
| Date: | 2011–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea11:98781&r=cmp |
| By: | Martin Feldstein; Daniel Feenberg; Maya MacGuineas |
| Abstract: | This paper analyzes a new way of reducing the major individual tax expenditures: capping the total amount that tax expenditures as a whole can reduce each individual's tax burden. More specifically, we examine the effect of limiting the total value of the tax reduction resulting from tax expenditures to two percent of the individual's adjusted gross income. Each individual can benefit from the full range of tax expenditures but can receive tax reduction only up to 2 percent of his AGI. Simulations using the NBER TAXSIM model project that a 2 percent cap would raise $278 billion in 2011. The paper analyzes the revenue increases by AGI class. The 2 percent cap would also cause substantial simplification by inducing more than 35 million taxpayers to shift from itemizing their deductions to using the standard deduction. For any taxpayer for whom the 2 percent cap is binding, a cap would reduce the volume of wasteful spending and the associated deadweight loss. Even for those taxpayers for whom the cap is not binding but who are induced by the cap to shift from itemizing to using the standard deduction, the deadweight loss associated with deductible expenditures would be completely eliminated |
| JEL: | H2 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16921&r=cmp |
| By: | Duch-Carvallo, Teresa; Malaga, Jaime E. |
| Abstract: | The impacts of maintaining increasing rates of Mexican chicken meat imports from the United States on United States grain sorghum price and Mexican GS imports from the United States were modeled using a non-spatial, partial equilibrium, econometric, and simulation international trade model. Twenty five equations were simultaneously estimated and validated as a system using three stages least squares. A 9-year baseline was estimated under existing projections and the impacts of the increasing rates of Mexican chicken meat imports from the United States were simulated and compared with the baseline. |
| Keywords: | Supply, Demand, NAFTA, International trade, Grain sorghum, Chicken meat exports, International Relations/Trade, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea11:98828&r=cmp |
| By: | Heid, Frank; Krüger, Ulrich |
| Abstract: | Critics claim that capital requirements can exacerbate credit cycles by restricting lending in an economic downturn. The introduction of Basel 2, in particular, has led to concerns that risksensitive capital charges are highly correlated with the business cycle. The Basel Committee is contemplating a revision of the Basel Accord by introducing counter-cyclical capital buffers. Others claim that capital buffers are already large enough to absorb fluctuations in credit risk. We address the question of the pro-cyclical effects of capital requirements in a general framework which takes into account banks' potential adjustment strategies. We develop a dynamic model of bank lending behavior and simulate different regulatory frameworks and macroeconomic scenarios. In particular, we address two related questions in our simulation study: How do business fluctuations affect capital requirements and bank lending? To what extent does the capital buffer absorb fluctuations in the level of mimimum required capital? -- |
| Keywords: | Minimum capital requirements,regulatory capital,capital buffer,cyclical lending,pro-cyclicality |
| JEL: | C61 E32 E44 G21 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp2:201103&r=cmp |