New Economics Papers
on Computational Economics
Issue of 2011‒06‒25
nine papers chosen by

  1. Assessing Development Strategies to Achieve the MDGs in Asia. Macroeconomic Strategies of MDG Achievement in the Kyrgyz Republic By Roman Mogilevsky; Anara Omorova
  2. Simulation Optimization via Bootstrapped Kriging: Tutorial By Kleijnen, Jack P.C.
  3. ASEAN’s Free Trade Agreements with the People’s Republic of China, Japan, and the Republic of Korea: A Qualitative and Quantitative Analysis By Estrada, Gemma; Park, Donghyun; Park, Innwon; Park, Soonchan
  4. Foundations of Blueprint for Cloud-based Service Engineering By Nguyen, D.K.
  5. Optimal modularity: A demonstration of the evolutionary advantage of modular architectures By Koen Frenken; Stefan Mendritzki
  7. Fiscal Decentralization, Redistribution and Growth By Bilin Neyapti; Zeynep Burcu Bulut-Cevik
  8. Retirement savings guidelines for residents of emerging market countries By Meng, Channarith; Pfau, Wade Donald
  9. Systemic risk and financial development in a monetary model By Philippe Moutot

  1. By: Roman Mogilevsky; Anara Omorova
    Abstract: The paper aims at analyzing macroeconomic and financial strategies, which are to ensure achievement of the Millennium Development Goals (MDGs) in the Kyrgyz Republic. The paper is based on results of simulations generated through the application of standard MAMS, a computable general equilibrium model adjusted to the country situation and calibrated with data of Kyrgyzstan. MAMS-model-based simulation results indicate that a continuation of the current policies under the baseline scenario would allow for achieving MDG1 (poverty reduction) only; the country would fall short of the targets for other MDGs. In order to achieve all MDGs, the country needs to increase government spending on MDG-relevant sectors (education, health, water and sanitation) by 7.8-8.1% of GDP per annum in comparison to the baseline scenario. The scenario that combines increased taxes and aid inflows seems to be the most realistic, but it would still require very substantial increases in tax collections and grant aid. The situation is going to be easier, if the economic growth rates 2011-2015 would be higher than 7% per annum. This is possible, if the government would be more successful in implementation of structural reforms, FDI and private domestic investments attraction and mobilization of resources for infrastructure development. Another possible way out is a substantial increase in government spending efficiency allowing for receiving higher social returns for money spent.
    Keywords: CGE model, Kyrgyzstan, macroeconomic policies, Millennium Development Goals
    JEL: D58 E61 E62 H50 H51 H52 H54 H6 I1 I2 O11 O15 O53
    Date: 2011
  2. By: Kleijnen, Jack P.C. (Tilburg University, Center for Economic Research)
    Abstract: Kriging (or Gaussian Process) metamodels may be analyzed through bootstrapping, which is a versatile statistical method but must be adapted to the speci c problem being analyzed. More precisely, a random or discrete-event simulation may be run several times for the same scenario (combination of simulation inputs); the resulting replicated responses may be resampled with replacement, which is called "distribution-free bootstrapping". In engineering, however, deterministic simulation is often applied; such a simulation is run only once for the same scenario, so "parametric bootstrapping" is used. This bootstrapping assumes a multivariate Gaussian distribution, which is sampled after its parameters are estimated from the simulation's input/output data. More specifically, this tutorial covers the following recent approaches: (1) E¢ cient Global Optimization (EGO) via Expected Improvement (EI) using parametric bootstrapping to obtain an estimator of the Kriging predictor's variance accounting for the randomness resulting from estimating the Kriging parameters. (2) Constrained optimization via Mathematical Programming applied to Kriging metamodels using distribution-free bootstrapping to validate these metamodels. (3) Robust optimization accounting for an environment that is not exactly known (so it is uncertain); this optimization may use Mathematical Programming and Kriging with distribution-free bootstrapping to estimate the Pareto frontier. (4) Assuming a characteristic like monotonicity for the outputs as a function of the inputs, bootstrapped Kriging may preserve this characteristic.
    Keywords: simulation;optimization;experimental design;stochastic processes;engineering.
    JEL: C0 C1 C9
    Date: 2011
  3. By: Estrada, Gemma (Asian Development Bank); Park, Donghyun (Asian Development Bank); Park, Innwon (Division of International Studies); Park, Soonchan (Department of Economics and International Trade)
    Abstract: Expanding trade with East Asia’s “Big Three” economic giants—the People’s Republic of China (PRC), Japan, and the Republic of Korea—offers a new potential source of growth for ASEAN in the post-global-crisis period. In fact, ASEAN has been actively pursuing trade liberalization with the Big Three. The central objective of this paper is to qualitatively and quantitatively assess the different permutations of ASEAN’s free trade agreements (FTAs) with the Big Three (e.g., ASEAN–PRC, ASEAN–Japan, ASEAN–Republic of Korea, and ASEAN+3). Our qualitative analysis is based on the theory of economic integration, and our quantitative analysis is based on a CGE model. The two types of analyses both suggest that an ASEAN+3 FTA would deliver the largest benefits for the region.
    Keywords: ASEAN; People’s Republic of China (PRC); Japan; Republic of Korea; trade; free trade agreement; free trade area; CGE model
    JEL: F10 F14 F15
    Date: 2011–03–01
  4. By: Nguyen, D.K. (Tilburg University, Center for Economic Research)
    Abstract: Current cloud-based service offerings are often provided as one-size-fits-all solution and give little or no room for customization. This limits the ability for application developers to pick and choose offerings from multiple software, platform and infrastructure service providers and configure them dynamically and in an optimal fashion to address their application requirements. Furthermore, combining different independent cloud-based services necessitates a uniform description format that facilitates their design, customization, and composition. Hence, there is a need to break down the monolithic offerings into loosely-coupled cloud services offered by multiple providers that can be exibly customized and (re-)composed in different settings. We propose in this paper the Blueprint concept - a uniform abstract description for cloud service offerings that may cross different cloud computing layers, i.e. software, platform and infrastructure. Using the proposed Blueprint Template for engineering cloud service offerings will solve these shortcomings and subsequently lower the barrier to entry for cloud computing.
    Date: 2011
  5. By: Koen Frenken; Stefan Mendritzki
    Abstract: Modularity is an important concept in evolutionary theorizing but lack of a consistent definition renders study difficult. Using the generalised NK-model of fitness landscapes, we differentiate modularity from decomposability. Modular and decomposable systems are both composed of subsystems but in the former these subsystems are connected via interface standards while in the latter subsystems are completely isolated. We derive the optimal level of modularity, which minimises the time required to globally optimise a system, both for the case of two-layered systems and for the general case of multi-layered hierarchical systems containing modules within modules. This derivation supports the hypothesis of modularity as a mechanism to increase the speed of evolution. Our formal definition clarifies the concept of modularity and provides a framework and an analytical baseline for further research.
    Keywords: Modularity, Decomposability, Near-decomposability, Complexity, NK-model, Search, hierarchy
    JEL: D20 D83 L23 O31 O32
    Date: 2011–06
  6. By: Jason Collins (UWA Business School, The University of Western Australia); Boris Baer (Plant Energy Biology ARC Centre of Excellence, The University of Western Australia); Ernst Juerg Weber (UWA Business School, The University of Western Australia)
    Abstract: This paper presents a quantitative analysis of the model developed in Galor and Moav, Natural Selection and the Origin of Economic Growth (2002), in which agents vary genetically in their preference for quality and quantity of children. We simulate a parametric form of the model, enabling examination of the transition from Malthusian stagnation to modern rates of economic growth. The simulations allow an assessment of the strength of the biological foundations of the model and demonstrate the susceptibility of the modern high-growth state to invasion by cheaters. Extending the model from two to three genotypes suggests the possibility of a return to Malthusian conditions rather than a permanent state of modern growth.
    Date: 2011
  7. By: Bilin Neyapti (Bilkent University); Zeynep Burcu Bulut-Cevik (METU)
    Abstract: This paper analyzes the welfare implications of a transfer mechanism in a fiscally decentralized economy where local governments select their tax collection effort to maximize their lifetime utility. We consider a transfer rule that both punishes for the lack of efficiency in tax-collection and compensates for the deviation of pre-tax or transfer income from a target level; in addition, a portion of transfers is considered to be directed towards investment. Simulations of the model’s optimal solution reveal that increasing punishment always results in increased steady state effort, despite the disincentives that increasing income compensation or directed investment may generate. Increasing punishment also improves capital accumulation the lower the rate of directed investments and the lower the tax rate. Further, efficiency in tax collection is achieved the lower the rate of directed investment and the higher the punishment rate.
    Keywords: Fiscal decentralization, redistribution
    JEL: E62 H71 O23
    Date: 2011–06
  8. By: Meng, Channarith; Pfau, Wade Donald
    Abstract: Most literature about retirement planning treats the working (accumulation) and retirement (decumulation) phases separately. The traditional approach decides on safe withdrawal rate, uses it to derive a wealth accumulation target, and then calculates the savings rate required to achieve this wealth target. Because low sustainable withdrawal rates tend to occur after bull markets, such a formulation will push individuals toward unnecessarily high savings rates to attain their desired retirement spending goals, reducing their feasible lifestyle prior to retirement. By jointly considering both phases of retirement planning, this study provides savings rate guidelines for individuals in 25 emerging market countries. The savings rates calculated here are those which provide an adequate success rate in financing desired retirement expenditures using bootstrapped Monte Carlo simulations. For many emerging market countries, these savings rates will be high, given the high volatility of returns for savings instruments and the inflationary environment. Starting to save early and using a relatively low stock allocation, a finding that contrasts with studies about the United States, provide the lowest necessary savings rate for a given probability of success.
    Keywords: safe withdrawal rates; retirement planning; savings and wealth accumulation targets; asset allocations; emerging market countries
    JEL: G11 C15 J26 D14
    Date: 2011–06–17
  9. By: Philippe Moutot (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: In a stochastic pure endowment economy with money but no financial markets, two types of agents trade one non-durable good using two alternative types of cash constraints. Simulations of the corresponding variants are compared to Arrow-Debreu and Autarky equilibriums. First, this illustrates how financial innovation or financial regression, including systemic risk, may arise in a neo-classical model with rational expectations and may or may not be countered. Second, the price and money partition dynamics that the two variants generate absent any macroeconomic shock, exhibit jumps as well as fat-tails and vary depending on the discount rate. JEL Classification: E44.
    Keywords: Financial development, Systemic Risk, Heterogeneity, Rational expectations, Monetary model, Cash constraints.
    Date: 2011–06

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