|
on Computational Economics |
|
Issue of 2012‒02‒20
sixteen papers chosen by |
| By: | OMRANI Hichem; CHARIF Omar; GERBER Philippe; BÓDIS Katalin; BASSE Reine Maria |
| Abstract: | This paper presents a method integrating artificial neural network (ANN) in cellular automata (CA) to simulate land use changes in Luxembourg and the areas adjacent to its borders. The ANN is used as a base of CA model transition rule. The proposed method shows promising results for prediction of land use over time. The ANN is validated using cross-validation technique and Receiver Operating Characteristic (ROC) curve analysis, and compared with logit model and a support vector machine approach. The application described in this paper highlights the interest of integrating ANNs in CA based model for land use dynamic simulation. |
| Keywords: | Artificial neural network; Cellular automata; Modelling; Land use changes; Spatial planning and dynamics |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2012-01&r=cmp |
| By: | Boeters, Stefan; Savard, Luc |
| Abstract: | This chapter reviews options of labour market modelling in a CGE framework. On the labour supply side, two principal modelling options are distinguished and discussed: aggregated, representative households and microsimulation based on individual household data. On the labour demand side, we focus on the substitution possibilities between different types of labour in production. With respect to labour market coordination, we discuss several wage-forming mechanisms and involuntary unemployment. -- |
| Keywords: | computable general equilibrium model,labour market,labour supply,labour demand,microsimulation,involuntary unemployment |
| JEL: | C68 D58 J20 J64 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11079&r=cmp |
| By: | Jan Baldeaux; Dale Roberts |
| Abstract: | In this paper, we discuss the application of quasi-Monte Carlo methods to the Heston model. We base our algorithms on the Broadie-Kaya algorithm, an exact simulation scheme for the Heston model. As the joint transition densities are not available in closed-form, the Linear Transformation method due to Imai and Tan, a popular and widely applicable method to improve the effectiveness of quasi-Monte Carlo methods, cannot be employed in the context of path-dependent options when the underlying price process follows the Heston model. Consequently, we tailor quasi-Monte Carlo methods directly to the Heston model. The contributions of the paper are threefold: We firstly show how to apply quasi-Monte Carlo methods in the context of the Heston model and the SVJ model, secondly that quasi-Monte Carlo methods improve on Monte Carlo methods, and thirdly how to improve the effectiveness of quasi-Monte Carlo methods by using bridge constructions tailored to the Heston and SVJ models. Finally, we provide some extensions for computing greeks, barrier options, multidimensional and multi-asset pricing, and the 3/2 model. |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1202.3217&r=cmp |
| By: | Witte, Björn-Christopher |
| Abstract: | The unpredictability of returns counts as a stylized fact of financial markets. To reproduce this fact, modelers usually implement noise terms - a method with several downsides. Above all, systematic patterns are not eliminated but merely blurred. The present article introduces a model in which systematic patterns are removed endogenously. This is achieved in a reality-oriented way: Intelligent traders are able to identify patterns and exploit them. To identify and predict patterns, a very simple artificial neural network is used. As neural network mimic the cognitive processes of the human brain, this method might be regarded as a quite accurate way of how traders identify patterns and forecast prices in reality. The simulation experiments show that the artificial traders exploit patterns effectively and thereby remove them, which ultimately leads to the unpredictability of prices. Further results relate to the influence of pattern exploiters on market efficiency. -- |
| Keywords: | financial markets,autocorrelations,artificial intelligence,agent-based modeling |
| JEL: | C45 G14 G17 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:82&r=cmp |
| By: | LI Jinjing; SOLOGON Denisa |
| Abstract: | This paper advances a structural inter-temporal model of labour supply that is able to simulate the dynamics of labour supply in a continuous setting and to circumvent two main drawbacks of most of the existing models. The first limitation is the inability to incorporate individual heterogeneity as every agent is sharing the same parameters of the utility function. The second one is the strong assumption that individuals make decisions in a world of perfect certainty. Essentially, this paper offers an extension of marginal-utility-of-wealth-constant labour supply functions known as “Frisch functions” under certainty and uncertainty with homogenous and heterogeneous preferences. Two alternative models are proposed for capturing individual heterogeneity. First, a “fixed effect vector decomposition” model, which allows the individual specific effects to be correlated with the explanatory variables included in the labour supply model, and second, a mixed fixed and random coefficient model, which incorporates a higher degree of individual heterogeneity by specifying individual coefficients. Uncertainty is controlled for by introducing an expectation correction into the model. The validation of each simulation model is realized in comparison with the standard Heckman model. The lifetime models based on the fixed effect vector decomposition yield the most stable and unbiased simulation results, both under certainty and uncertainty. Due to its improved accuracy and stability, this lifetime labour supply model is particularly suitable for enhancing the performance of the pension models, thus providing a better reference for policymaking. |
| Keywords: | lifetime labour supply; dynamic microsimulation |
| JEL: | C20 D90 J22 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2011-57&r=cmp |
| By: | Chunding Li; John Whalley |
| Abstract: | Numerical simulation analysis of bargaining solutions is little developed in existing literature. Here we use a multi country, single period numerical general equilibrium model which captures China and her major trading partners and examine the outcomes of trade policy bargaining solutions (bargaining over tariffs and financial transfers) over time as China grows more rapidly than her trade partners. We compute gains relative to non-cooperative Nash equilibria for a range of model parameterizations. This yields a measure of both absolute and relative gain to China from bargaining. We calibrate our model to base case data for 2008 and use a model formulation where there are heterogeneous goods across countries. The gains from trade bargaining accrue more heavily to other countries when we use 2008 data rather than later year data. We then consider the impacts out into the future of different country growth rates which sharply increases China’s relative size. Our objective is to assess how China’s gains from bargaining change over time; whether they grow at a faster rate than GDP growth and for which parameterizations. Our simulation results indicate that China’s welfare gain from trade bargaining will increase over time if countries keep their present GDP growth rates for several decades, but there are major difference when using different bargaining solution concepts. These differences have not been noted in existing literature but have an intuitive explanation. Our results also indicate that if China jointly bargains along with India, Brazil and other developing countries with the OECD, China’s gain will further increase. Bargaining gains are also sensitive to country size. When we use PPP to adjust China’s relative GDP size; China’s trade bargaining welfare gain increases by about 37%. |
| JEL: | C68 C78 D60 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17826&r=cmp |
| By: | Yun Bao (Toyota Financial Services Australia); Carl Chiarella (Finance Discipline Group, UTS Business School, University of Technology, Sydney; Finance Discipline Group, UTS Business School, University of Technology, Sydney) |
| Abstract: | This paper proposes an auxiliary particle filter algorithm for inference in regime switching stochastic volatility models in which the regime state is governed by a first-order Markov chain. We proposes an ongoing updated Dirichlet distribution to estimate the transition probabilities of the Markov chain in the auxiliary particle filter. A simulation-based algorithm is presented for the method which demonstrated that we are able to estimate a class of models in which the probability that the system state transits from one regime to a different regime is relatively high. The methodology is implemented to analyze a real time series: the foreign exchange rate of Australian dollars vs South Korean won. |
| Keywords: | Particle filters; Markov switching stochastic volatility models; Sequential Monte Carlo simulation |
| JEL: | C61 D11 |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:299&r=cmp |
| By: | Calvo-Garrido, Maria del Carmen; Pascucci, Andrea; Vázquez Cendón, Carlos |
| Abstract: | In this paper, we address the mathematical analysis and numerical solution of a model for pricing a defined benefit pension plan. More precisely, the benefits received by the member of the plan depend on the average salary and early retirement is allowed. Thus, the mathematical model is posed as an obstacle problem associated to a Kolmogorov equation in the time region where the salary is being averaged. Previously to the initial averaging date, a nonhomogeneous one factor Black-Scholes equation is posed. After stating the model, existence and regularity of solutions are studied. Moreover, appropriate numerical methods based on a Lagrange-Galerkin discretization and an augmented Lagrangian active set method are proposed. Finally, some numerical examples illustrate the performance of the numerical techniques and the properties of the solution and the free boundary. |
| Keywords: | retirement plans; options pricing; Kolmogorov equations; complementarity problem; numerical methods; augmented Lagrangian formulation |
| JEL: | G23 G13 G00 |
| Date: | 2012–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36494&r=cmp |
| By: | Dekkers, Gijs; Desmet, Raphaël |
| Abstract: | This presentation discusses how such integrated approach using shared demographic and macroeconomic assumptions has been developed in Belgium. It describes the dynamic microsimulation model MIDAS, highlighting how it aligns to the simulation results of the semi-aggregate model MALTESE. The authors would like to thank Jean-Maurice Frère and Michel Englert for their valuable comments on a previous version of this paper. |
| Keywords: | Pensions; adequacy; sustainability; microsimulation |
| JEL: | D31 J14 I32 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36138&r=cmp |
| By: | Christoph Böhringer, Brita Bye, Taran Fæhn, and Knut Einar Rosendahl (Statistics Norway) |
| Abstract: | In the absence of effective world-wide cooperation to curb global warming, import tariffs on embodied carbon have been proposed as a potential supplement to unilateral emissions pricing. We consider alternative designs for such tariffs, and analyze their effects on global welfare within a multi-region, multi-sector computable general equilibrium (CGE) model of global trade and energy. Our analysis suggests that the most cost-efficient policy could be region-specific tariffs on all products, based on direct plus electricity emissions. In the end, however, the potential cost savings through carbon tariffs must be weighed against the administrative costs as well as legal issues and political considerations. |
| Keywords: | carbon leakage; embodied carbon; border tariffs |
| JEL: | Q43 Q54 H2 D61 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:682&r=cmp |
| By: | Torfinn Harding and Frederick van der Ploeg (Statistics Norway) |
| Abstract: | Official forecasts for oil revenues and the burden of pensioners are used to estimate forward-looking fiscal policy rules for Norway and compared with permanent-income and bird-in-hand rules. The results suggest that fiscal reactions have been partial forward-looking with respect to the rising pension bill, but backward-looking with respect to oil and gas revenues. Solvency of the government finances might be an issue with the fiscal rules estimated from historical data. Simulation suggests that declining oil and gas revenue and the costs of a rapidly graying population will substantially deteriorate the net government asset position by 2060 unless fiscal policy becomes more prudent or current pension and fiscal reforms are successful. |
| Keywords: | oil windfalls; official forecasts; forward-looking fiscal policy rules; permanent income hypothesis; graying population; debt sustainability |
| JEL: | H20 H63 Q33 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:676&r=cmp |
| By: | William Barnett (Department of Economics, The University of Kansas); Isaac Kalonda-Kanyama (Department of Economics, The University of Kansas) |
| Abstract: | This paper assesses the ability of the Rotterdam model and of three versions of the almost ideal demand system (AIDS) to recover the time-varying elasticities of a true demand system and to satisfy theoretical regularity. Using Monte Carlo simulations, we find that the Rotterdam model performs better than the linear-approximate AIDs at recovering the signs of all the time-varying elasticities. More importantly, the Rotterdam model has the ability to track the paths of time-varying income elasticities, even when the true values are very high. The linear-approximate AIDS, not only performs poorly at recovering the time-varying elasticities but also badly approximates the nonlinear AIDS. |
| Keywords: | AIDS, Rotterdam model, structural time series models, Monte Carlo experiment, theoretical regularity. |
| JEL: | D12 C51 C52 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:201201&r=cmp |
| By: | Lemoine, Derek M. (Energy and Resources Group, University of California, Berkeley); Traeger, Christian P. (University of California, Berkeley. Dept of agricultural and resource economics) |
| Abstract: | We model optimal policy when the probability of a tipping point, the welfare change due to a tipping point, and knowledge about a tipping point's trigger all depend on the policy path. Analytic results demonstrate how optimal policy depends on the ability to affect both the probability of a tipping point and also welfare in a post-threshold world. Simulations with a numerical climate- economy model show that possible tipping points in the climate system increase the optimal near-term carbon tax by up to 45% in base case speciffcations. The resulting policy paths lower peak warming by up to 0.5 C compared to a model without possible tipping points. Different types of tipping points have qualitatively different effects on policy, demonstrating the importance of explicitly modeling tipping points' effects on system dynamics. Aversion to ambiguity in the threshold's distribution can amplify or dampen the effect of tipping points on optimal policy, but in our numerical model, ambiguity aversionincreases the optimal carbon tax. |
| Keywords: | tipping point, threshold, regime shift, ambiguity, climate, uncertainty, integrated assessment, dynamic programming, social cost of carbon, carbon tax |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:are:cudare:1111r&r=cmp |
| By: | Nicole Immorlica |
| Abstract: | We revisit classic algorithmic search and optimization problems from the perspective of competition. Rather than a single optimizer minimizing expected cost, we consider a zero-sum game in which an optimization problem is presented to two players, whose only goal is to outperform the opponent. Such games are typically exponentially large zero-sum games, but they often have a rich combinatorial structure. We provide general techniques by which such structure can be leveraged to find minmax-optimal and approximate minmax-optimal strategies. We give examples of ranking, hiring, compression, and binary search duels, among others. We give bounds on how often one can beat the classic optimization algorithms in such duels. |
| Date: | 2011–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:nwu:cmsems:1545&r=cmp |
| By: | Figari, Francesco; Matsaganis, Manos; Sutherland, Holly |
| Abstract: | This study analyses the financial well-being of elderly people across Europe. Using the European microsimulation model EUROMOD, which facilitates the identification of minimum pension schemes in a comparable way across countries, we show the extent to which these schemes serve to reduce the risk of poverty among elderly. The main findings show that there is a strong correlation between the resources allocated to the minimum pension schemes and the reduction in poverty risk among the elderly. Nevertheless, the financial well-being of older people depends crucially on the pension system as a whole. Countries with generous minimum pension schemes seem to allocate relatively fewer resources to other pillars of the pension system. On the one hand, they are more effective in reducing elderly poverty rates. On the other hand, they fail to ensure a level of financial well-being of older people in line with the overall population. |
| Date: | 2011–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em7-11&r=cmp |
| By: | Maria A. Cunha-e-Sa; Sofia F. Franco; Renato Rosa |
| Abstract: | This paper has developed a model of a single forest owner operating with perfect foresight in a dynamic open-city environment that allows for switching between alternative competing land uses (forest and urban use) at some point in the future. The model also incorporates external values of an even-aged standing forest in addition to the value of timber when it is harvested. Timber is exploited based on a multiple rotation model a la Faustmann with clear-cut harvesting. In contrast to previous models, our alternative land use to forest land is endogenous. Within this framework, we study the problem of the private owner as well as that of the social planner, when choosing the time to harvest, the time to convert land and the intensity of development. We also examine the extent to which the two-way linkage between urban development and forest management practices (timber production and provision of forest amenities) contributes to economic efficiency and improvements in non-market forest benefits. Finally, we consider policy options available to a regulator seeking to achieve improvements in efficiency including anti-sprawl policies (impact fees and density controls) and forest policies such a yield tax. Numerical simulations illustrate our analytical results. JEL codes: |
| Keywords: | Deforestation, Urban Development, Forest Management Practices, Anti-Sprawl Policies, Yield Taxes |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp559&r=cmp |