New Economics Papers
on Computational Economics
Issue of 2011‒11‒28
seven papers chosen by

  1. Predicting Recessions: A New Approach For Identifying Leading Indicators and Forecast Combinations By Turgut Kisinbay; Chikako Baba
  2. Energy taxes and oil price shock By Cremer, Helmuth; Gahvari, Firouz; Ladoux, Norbert
  3. Kullback-Leibler simplex By Kangpenkae, Popon
  4. Firms entry, monetary policy and the international business cycle By Cavallari Lilia
  5. Measuring the impact of market coupling on the Italian electricity market using ELFO++ By Elisabetta Pellini
  6. Pulse vs. Optimal Stationary Fishing: The Northern Stock of Hake. By José María da Rocha; María-José Gutiérrez; Luís T. Antelo
  7. Global Rebalancing: Implications for Low-Income Countries By Yongzheng Yang

  1. By: Turgut Kisinbay; Chikako Baba
    Abstract: This study proposes a data-based algorithm to select a subset of indicators from a large data set with a focus on forecasting recessions. The algorithm selects leading indicators of recessions based on the forecast encompassing principle and combines the forecasts. An application to U.S. data shows that forecasts obtained from the algorithm are consistently among the best in a large comparative forecasting exercise at various forecasting horizons. In addition, the selected indicators are reasonable and consistent with the standard leading indicators followed by many observers of business cycles. The suggested algorithm has several advantages, including wide applicability and objective variable selection.
    Keywords: Business cycles , Economic forecasting , Economic indicators , Economic recession , Forecasting models , United States ,
    Date: 2011–10–13
  2. By: Cremer, Helmuth; Gahvari, Firouz; Ladoux, Norbert
    Abstract: This paper examines if an energy price shock should be compensated by a reduction in energy taxes to mitigate its impact on consumer prices. Such an adjustment is often debated and advocated for redistributive reasons. Our investigation is based on a model that characterizes second-best optimal taxes in the presence of an externality generated by energy consumption. Energy is used by households as a consumption good and by the productive sector as an input. We calibrate this model on US data and proceed to simulations of this empirical model. We assume that energy prices are subject to an exogenous shock. For different levels of this shock, we calculate the optimal tax mix including income, commodity and energy taxes. We show that optimal energy taxes are affected by redistributive consideration and that optimal energy tax is less than the Pigouvian tax (marginal social damage). The difference is an implicit subsidy representing roughly 10% of the Pigouvian price. Interestingly, the simulations show that an variation in the energy price only has an almost negligible effect on this percentage. In other words, even a very large oil price increase will only have a small effect on the optimal tax on energy. Nevertheless, it appears that the energy tax is used to mitigate the impact of the energy shock. However, this result is not explained by redistributive consideration but by the fact that the Pigouvian tax (rate) decreases as the price of energy increases. This is a purely arithmetic adjustment due to the fact that the marginal social dammage does not change. Consequently, the marginal dammage as a percentage of the energy price (which defines the Pigouvian tax rate) decreases as the price increases.
    JEL: H21 H23
    Date: 2011–09
  3. By: Kangpenkae, Popon
    Abstract: This technical reference presents the functional structure and the algorithmic implementation of KL (Kullback-Leibler) simplex. It details the simplex approximation and fusion. The KL simplex is fundamental, robust, adaptive an informatics agent for computational research in economics, finance, game and mechanism. From this perspective the study provides comprehensive results to facilitate future work in such areas.
    Keywords: KL divergence; second-order perceptron; informatics agent; simplex projection and fusion; computational economics-game-finance-mechanism
    JEL: C63 C61
    Date: 2011–11
  4. By: Cavallari Lilia
    Abstract: This paper provides a novel theory of the international business cycle grounded on firms entry and sticky prices. It shows that under simple monetary rules pro-cyclical entry can generate fluctuations in consumption, output and investment as large as those observed in the data while at the same time providing positive international comovements and highly volatile terms of trade. The capacity to capture these stylized facts of the international business cycle overcomes the well-known difficulties of the standard open economy real business cycle model in this regard. Numerical simulations show that floating regimes exacerbate counter-cyclical markup movements. Fixed regimes, on the other hand, lead to an increase in the volatility of?firm entry.
    Keywords: product variety, firm entry, international business cycle, monetary policy, interest rate rules, exchange rate regimes
    JEL: E31 E32 E52
    Date: 2011–11
  5. By: Elisabetta Pellini (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: This paper evaluates the impact on the Italian electricity market of replacing the current explicit auction mechanism with market coupling. Maximizing the use of the cross-border interconnection capacity, market coupling increases the level of market integration and facilitates the access to low-cost generation by consumers located in high-cost generation countries. Thus, it is expected that a high-priced area such as Italy could greatly benefit from the introduction of this mechanism. In this paper, the welfare benefits are estimated under alternative market scenarios for 2012, employing the optimal dispatch model ELFO++. The results of the simulations suggest that the improvement in social surplus is likely to be significant, especially when market fundamentals are tight.
    Keywords: Market coupling; market integration; Italian day-ahead electricity market.
    JEL: C61 C63 D40 L10 Q40
    Date: 2011–10
  6. By: José María da Rocha (Universidade de Vigo, Facultad CC. Económicas); María-José Gutiérrez (FAEII and MacLab - University of the Basque Country); Luís T. Antelo (Process Engineering Group. Instituto de Investigaciones Marinas (IIM) CSIC)
    Abstract: Pulse …shing may be a global optimal strategy in multicohort …fisheries. In this article we compare the pulse fi…shing solutions obtained by using global numerical methods with the analytical stationary optimal solution. This allows us to quantify the potential bene…fits associated with the use of periodic …fishing in the Northern Stock of hake. Results show that: …first, management plans based exclusively on traditional reference targets as Fmsy may drive …fishery economic results far from the optimal; second, global optimal solutions would imply, in a cyclical manner, the closure of the …fishery for some periods and third, second best stationary policies with stable employment only reduce optimal present value of discounted pro…fit in a 2%.
    Keywords: optimal …sheries, management optimization in age-structured models, pulse …shing
    JEL: Q22 Q28 Q57
    Date: 2011–11–18
  7. By: Yongzheng Yang
    Abstract: While global rebalancing will mainly involve structural realignment among major advanced and emerging market economies, it could have significant impact on low-income countries (LICs). Simulations using a global general equilibrium model show that a more balanced global economy would tend to improve the current account balance in LICs with limited impact on domestic output. However, there could be adverse terms of trade effects on some LICs as the prices of manufactured goods rise. On the other hand, such prices increases could provide an impetus to export diversification in many LICs, raising growth in the long run. The output and terms of trade effects would be significantly amplified if structural adjustment is impeded by factor immobility and other rigidities.
    Keywords: Consumer goods , Current account balances , Demand , Export competitiveness , Export growth , Low-income developing countries , Manufacturing , Price increases , Terms of trade ,
    Date: 2011–10–19

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