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on Computational Economics |
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Issue of 2011‒04‒30
twelve papers chosen by |
| By: | Lengnick, Matthias |
| Abstract: | This paper develops a baseline agent-based macroeconomic model and contrasts it with the common dynamic stochastic general equilibrium approach. Although simple, the model can reproduce a lot of the stylized facts of business cycles. The author argues that agent-based modeling is an adequate response to the recently expressed criticism of macroeconomic methodology. It does not depend on the strict assumption of rationality and allows for aggregate behavior that is more than simply a replication of microeconomic optimization decisions. At the same time it allows for absolutely consistent micro foundations. Most importantly, it does not depend on equilibrium assumptions or fictitious auctioneers and does therefore not rule out coordination failures, instability and crisis by definition. -- |
| Keywords: | agent-based modeling,complex adaptive systems,microfoundations of macroeconomics |
| JEL: | B4 E1 E50 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cauewp:201104&r=cmp |
| By: | Mele, Antonio |
| Abstract: | This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques à la Marcet and Marimon (2011) 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; collocation method; dynamic models with private information; recursive contracts |
| JEL: | D86 C63 C61 |
| Date: | 2011–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:30310&r=cmp |
| By: | Gilles DUFRENOT; Adelya OSPANOVA; Alain SAND-ZANTMAN |
| Abstract: | This paper presents a small macro-econometric model of Kazakhstan to study the impact of various economic policies. It uses a new approach to test the existence of a level relationship between a dependent variable and a set of regressors, when the characteristics of the regressors’ non-stationarity are not known with certainty. The simulations provide insights into the role of a tight monetary policy, higher foreign direct investment, and rises in nominal wages and in crude oil prices. The results obtained are in line with economic observations and give some support to the policies chosen as priority targets by the Kazakh authorities for the forthcoming years. |
| Keywords: | Simulation, Forecasting, Transition, Stabilization, Central Asian |
| JEL: | E17 F47 O53 P39 |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2010-1001&r=cmp |
| By: | Charles Mason; Andrew Plantinga |
| Abstract: | Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important to the use of carbon offsets to mitigate climate change. We analyze optimal contracts for forest carbon, an important offset category. A novel national-scale simulation of the contracts is conducted that uses econometric results derived from micro data. For a 50 million acre increase in forest area, annual government expenditures with optimal contracts are found to be about $4 billion lower compared to costs with a uniform subsidy. |
| JEL: | D8 L15 Q2 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16963&r=cmp |
| By: | Márcio Laurini (IBMEC Business School) |
| Abstract: | This paper discusses Bayesian procedures for factor selection in dynamic term structure models through simulation methods based on Markov Chain Monte Carlo. The number of factors, besides influencing the fitting and prediction of observed yields, is also relevant to features such as the imposition of no-arbitrage conditions. We present a methodology for selecting the best specification in the Nelson-Siegel class of models using Reversible Jump MCMC. |
| Keywords: | Dynamic Term Structure Models, Model Selection, Reversible Jump MCMC |
| JEL: | C11 C15 G12 |
| Date: | 2011–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:ibr:dpaper:2011-02&r=cmp |
| By: | J.-C. BRICONGNE (Banque de France et Université Paris I); J.-M. FOURNIER (Crest-Insee); V. LAPÈGUE (Insee); O. MONSO (Insee) |
| Abstract: | The financial crisis started in the United States in 2007 on the subprime mortgage market and, then, gradually spread to all financial markets and strongly impacted growth in the main advanced countries through the years 2008 and 2009. Given its scope and its subsequent uncertainty, we discuss the capacity of macroeconometric models estimated on the past to quantify its various transmission channels. We try to measure the total impact of the crisis on the economy of seven advanced countries and on the euro area as a whole using the macroeconomic multinational model NiGEM. During the years 2008 and 2009, Germany suffered from a particularly strong drop in world trade, which would explain more than a half of the effect of the crisis measured in this way in 2009. The United Kingdom and the United States may especially have been affected by wealth effects and a strong drop in their inner demand. This drop may partly have been due to credit tightening. Japan seems to be the most affected country in 2009: the drop in foreign trade was exacerbated by the appreciation of the yen and investment seems to have strongly over-reacted to the fall in activity. A contrario, the fact that France suffered from a less marked drop in output in 2009 might be explained by an absence of over-reaction in economic behaviours and less sensitivity to the fall in world trade. |
| Keywords: | financial crisis, simulation, macroeconometric model, macro-financial linkages |
| JEL: | E17 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2011-05&r=cmp |
| By: | Rudolf Berghammer (Institut für Informatik - Universität Kiel); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne); Harrie de Swart (Department of Philosophy - Erasmus University Rotterdam) |
| Abstract: | Simple games are a powerful tool to analyze decision-making and coalition formation in social and political life. In this paper we present relational models of simple games and develop relational algorithms for solving some game-theoretic basic problems. The algorithms immediately can be transformed into the language of the Computer Algebra system RelView and, therefore, the system can be used to solve the problems and to visualize the results of the computations. As an example, we consider the German parliament after the 2009 election. |
| Keywords: | Simple games, relation algebra, RelView. |
| JEL: | C71 C63 C88 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:11014&r=cmp |
| By: | Alfredo Marvão Pereira (Department of Economics, The College of William and Mary); Rui M. Pereira (Department of Economics, University of the Algarve) |
| Abstract: | This paper explores the capacity for environmental reform to reduce CO2 emissions, stimulate economic performance, and promote fiscal sustainability. Simulation results suggest that reforms based on CO2 taxation stimulate GDP when tax revenues are used to promote private or public investment and employment when used to finance reductions in personal income taxation or firms' social security contributions. More generally, reforms allow for reductions in the costs of climate policy, a weaker realization of the second dividend. In addition, several reforms lead to reductions in public debt, the realization of a third dividend. When political constraints on reducing public spending are considered, however, this third dividend only materializes when revenues finance public investment or reductions in the firms' social security contributions. Overall, our results suggest that low growth and high public debt need not be regarded as hindrances for environmental fiscal reform but can actually be seen as catalysts. |
| Keywords: | Carbon Tax, Environmental Fiscal Reform, Economic Growth, Budgetary Consolidation,Dynamic General Equilibrium, Endogenous Growth |
| JEL: | D58 H54 H63 Q48 Q54 |
| Date: | 2011–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:114&r=cmp |
| By: | Akoété Ega Agbodji; Koffi Yovo; Kodjo Abalo; Komlan Dodzi Agbodji; Ablamba Ahoéfavi Johnson |
| Abstract: | A general calculable equilibrium model, calibrated using the 2000 SAM, was developed to analyze the possible effects of an external price shock and the effects of a sectoral investment strategy on the distribution of income in Togo in the context of the PRSP. Analysis of the SAM was used to highlight the importance of food production in the creation and distribution of income in Togo. This sector contributes 20% of the country’s value added, 67 percent of which is paid to informal labour in the form of wages. Given that poverty is most prevalent in rural areas, where there is a 74.3 percent incidence of poverty as opposed to 36.8 percent for urban areas, it is reasonable for the government to make improved productivity and the creation and distribution of wealth in rural areas a national priority. The effects of a ten percent increase in capital in both food and cash crop farming are as follows: (i) an increase in value added and production, along with a decrease in agricultural prices; (ii) improved price-competitiveness for the economy; (iii) an increase in final consumption and net exports, resulting in an expansion of GDP; (iv) an increase in real wages for informal labour, which is heavily used in the agricultural sector, along with lower wages in the formal sector; and (v) higher real income and welfare for households. This analysis thus confirms that increasing investment in agriculture, particularly for food crops, could improve the distribution of income and welfare in rural areas. Moreover, the simulation of a ten percent increase in export prices for cash crops, textiles, and fats and oils reveals non negligible macroeconomic and sectoral effects as well as improved welfare. |
| Keywords: | Poverty, government strategies, CGE models |
| JEL: | I32 I38 C68 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:mpiacr:2011-02&r=cmp |
| By: | Tilman Dette; Scott Pauls; Daniel N. Rockmore |
| Abstract: | Globalization has created an international financial network of countries linked by trade in goods and assets. These linkages allow for more efficient resource allocation across borders, but also create potentially hazardous financial interdependence, such as the great financial distress caused by the 2010 threat of Greece's default or the 2008 collapse of Lehman Brothers. Increasingly, the tools of network science are being used as a means of articulating in a quantitative way measures of financial interdependence and stability. In this paper, we employ two network analysis methods on the international investment network derived from the IMF Coordinated Portfolio Investment Survey (CPIS). Via the "error and attack" methodology [1], we show that the CPIS network is of the "robust- yet-fragile" type, similar to a wide variety of evolved networks [1, 2]. In particular, the network is robust to random shocks but very fragile when key financial centers (e.g., the United States and the Cayman Islands) are affected. Using loss-given-default dynamics [3], "extinction analysis" simulations show that interdependence increased from 2001 to 2007. Our simulations further indicate that default by a single relatively small country like Greece can be absorbed by the network, but that default in combination with defaults of other PIGS countries (Portugal, Ireland, and Spain) could lead to a massive extinction cascade in the global economy. Adaptations of this approach could form the basis for risk metrics designed to monitor and guide policy formulation for the stability of the global economy. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1104.4249&r=cmp |
| By: | Rutten, Martine M.; Chant, Lindsay J.; Meijerink, Gerdien W. |
| Abstract: | This paper analyses the impacts of trade policy responses to rising world food prices by carrying out a series of stylised experiments in the wheat market using a world trade model, GTAP. The sequence of events that is modelled comprises a negative wheat supply shock and subsequent implementation of an export tax by a major net exporter and a reduction in import tariffs by a small importer. The effects of trade policy responses are contrasted with those of full liberalisation of the wheat market. At the core are the (opposite) effects on producers and consumers, as well as the terms-of-trade and trade tax revenue effects. Food security is shown to depend crucially on changes in prices but also in incomes that are associated with changes in factor returns. The results reveal that major net exporters are generally better off when implementing export taxes for food security purposes. Large exporting countries export price instability causing world food prices to rise further. Net importing countries lose out and have limited leeway to reduce tariffs or subsidise imports. Liberalising wheat trade mitigates rising prices and contributes to food security, but to the detriment of production in Africa and Asia, making them more dependent on and vulnerable to changes in the world market. Concerted action at the WTO forum is required, notably clarifying and sharpening the rules regarding export measures. |
| Keywords: | food security; world food crisis; international grain trade; trade measures; trade liberalisation; CGE modelling |
| JEL: | C68 F10 Q18 |
| Date: | 2011–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:30354&r=cmp |
| By: | Sirio Aramonte; Marius del Giudice Rodriguez; Jason J. Wu |
| Abstract: | Trading portfolios at Financial institutions are typically driven by a large number of financial variables. These variables are often correlated with each other and exhibit by time-varying volatilities. We propose a computationally efficient Value-at-Risk (VaR) methodology based on Dynamic Factor Models (DFM) that can be applied to portfolios with time-varying weights, and that, unlike the popular Historical Simulation (HS) and Filtered Historical Simulation (FHS) methodologies, can handle time-varying volatilities and correlations for a large set of financial variables. We test the DFM-VaR on three stock portfolios that cover the 2007-2009 financial crisis, and find that it reduces the number and average size of back-testing breaches relative to HS-VaR and FHS-VaR. DFM-VaR also outperforms HS-VaR when applied risk measurement of individual stocks that are exposed to systematic risk. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2011-19&r=cmp |