nep-cmp New Economics Papers
on Computational Economics
Issue of 2012‒04‒23
twelve papers chosen by
Stan Miles
Thompson Rivers University

  1. Equilibrium policy simulation with random utility models of labor supply By Columbino, Ugo
  2. A Financial Social Accounting Matrix (SAM) for Luxembourg By Amela Hubic
  3. "Should the Japanese Tax System Be More Progressive? An Evaluation Using Simulated SMCFs Based on the Discrete Choice Model of Labor Supply" By Shun-ichiro Bessho; Masayoshi Hayashi
  4. Monetary Policies and Nigerian Economy:Simulations from Dynamic Stochastic General Equilibrium(DSGE)Model By Nwaobi, Godwin
  5. Input-Output Modelling in the MENA Region - A case study for Morocco By Britta Stöver; Kirsten S. Wiebe; Dr. Ulrike Lehr; Dr. Marc I. Wolter
  6. Improving Land-use Modelling within CGE to Assess Forest-based Mitigation Potential and Costs By Melania Michetti; Ramiro Parrado
  7. The Relationship between Labor Market Conditions and Welfare Receipt in Australia: A Stock-Flow Analysis By Ha Vu
  8. Monetary Policy in Low Income Countries in the Face of the Global Crisis: The Case of Zambia By Jaromir Benes; Alfredo Baldini; Mai Dao; Rafael Portillo; Andrew Berg
  9. The Market Value of Variable Renewables By Lion Hirth
  10. Trade and Financial Spillover on Hong Kong SAR from a Downturn in Europe and Mainland China By Papa N'Diaye; Ashvin Ahuja
  11. Perturbative Expansion Technique for Non-linear FBSDEs with Interacting Particle Method By Masaaki Fujii; Akihiko Takahashi
  12. Expected Poverty Changes with Economic Growth and Redistribution By Abdelkrim Araar

  1. By: Columbino, Ugo
    Abstract: Many microeconometric models of discrete labor supply include alternative-specific constants meant to account for (possibly besides other factors) the density or accessibility of particular types of jobs (e.g. part-time jobs vs. full-time jobs). The most common use of these models is the simulation of tax-transfer reforms. The simulation is usually interpreted as a comparative static exercise, i.e. the comparison of different equilibria induced by different policy regimes. The simulation procedure, however, typically keeps fixed the estimated alternative-specific constants. In this note we argue that this procedure is not consistent with the comparative statics
    Date: 2012–04–05
  2. By: Amela Hubic
    Abstract: A Social Accounting Matrix (SAM) is a comprehensive, economy-wide data framework of real accounts, typically representing the economy of a nation but also providing the link between the economy and the rest of the world in terms of trade flows. However, in order to have a complete picture of the transactions taking place in an economy, real accounts are not sufficient and need to be complemented with financial accounts. This paper describes the construction of the first financial SAM for Luxembourg for the year 2007 by integrating both financial institutions and financial instruments into the real SAM. This powerful tool has two principal objectives: first, to organize the information that would allow an analysis of the structure of the economy of Luxembourg and second, to provide the benchmark data set for the creation of a financial computable general equilibrium (CGE) model.
    Keywords: financial social accounting matrix, computable general equilibrium models, financial accounts, portfolio choice, financial institutional sectors
    JEL: D30 C68 D57 G11 G20 D53
    Date: 2012–03
  3. By: Shun-ichiro Bessho (Faculty of Economics, Keio University); Masayoshi Hayashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper evaluates the 1999 national income tax reform in Japan by comparing the social marginal costs of public funds (SMCFs) for changing the marginal tax rates in different income brackets before the reform occurred. To do so, we estimate the discrete choice model of labor supply using a data set of Japanese households in 1997 derived from the Employment Status Survey. We obtain an analog of the SMCF that allows for labor supply responses along both the intensive and the extensive margins on an individual basis. We generate such SMCFs using a micro-simulation method that utilizes the discrete choice model estimates for household preferences. Based on the simulated SMCFs evaluated using various distributional weights, we find that the value of the SMCF for a 1% increase in the marginal tax rate in any given income bracket decreases as the bracket moves from the bottom to the top. This finding suggests that the national government should have made the Japanese income tax system more progressive rather than less progressive as carried out in the 1999 reform. </table>
    Date: 2012–04
  4. By: Nwaobi, Godwin
    Abstract: Traditionally, the task of monetary management is usually performed by the monetary authority on behalf of government. However, a key challenge in monetary management is how to deal with uncertainty. Thus, the relevant policy questions must include how best the available instruments of monetary policy be deployed in shock prone mature stabilizers. Therefore, the basic thrust of this paper is to evaluate monetary policy - tradeoffs using a dynamic stochastic general equilibrium(DSGE)model estimated on data for Nigeria.
    Keywords: dynamic; stochastic; general; equilibrium; dsge; nigeria; monetary management; shocks; var; monetary policy; fiscal policy; exchange rate; central bank
    JEL: D50 C68 C63 C50 E58
    Date: 2012–04–17
  5. By: Britta Stöver (GWS - Institute of Economic Structures Research); Kirsten S. Wiebe (GWS - Institute of Economic Structures Research); Dr. Ulrike Lehr (GWS - Institute of Economic Structures Research); Dr. Marc I. Wolter (GWS - Institute of Economic Structures Research)
    Abstract: Science-based policy analysis becomes increasingly important in the globalised world. Complex economic and social structures need to be thoroughly analysed and direct and indirect effects of policy measures should be identified and, if possible, quantified. Economic policy modelling has a long tradition (Almon, 1991) and economic models have over the past decades become more detailed regarding the economic structure and more extensive regarding the non-economic aspects represented in these models. There exist detailed structural economic models for most OECD countries. For newly emerging economies and developing countries only few such models exist. A global database and model environment is provided by the GTAP project, which is frequently used to develop computable general equilibrium (CGE) models. These models use a unique database, which often is not compatible to datasets of national statistic offices. Still, there are countries for which no such structural economic models exist. The macro-economic PRESIMO model for Morocco for example does not include the industry structure of the Moroccan economy. However, analyses at the industry level are important when analysing the development of for example labour markets or energy demand. The economic opportunities from international projects such as DESERTEC (Concentrating Solar Power in the Saharan Region) could be evaluated identifying sectors, which benefit the most. Using the example of Morocco this paper outlines the prerequisites for developing structural economic models and shows application possibilities of these models for simulating the effects of policy measures.
    Keywords: Input-Output modelling, policy analysis, application possibilities
    JEL: O21
    Date: 2012
  6. By: Melania Michetti (Centro Euro-mediterraneo per i Cambiamenti Climatici (CMCC), Fondazione Eni Enrico Mattei (FEEM), Università Cattolica del Sacro Cuore di Milano); Ramiro Parrado (Centro Euro-mediterraneo per i Cambiamenti Climatici (CMCC), Fondazione Eni Enrico Mattei (FEEM), Università Ca’ Foscari di Venezia)
    Abstract: We present a computable general equilibrium model properly modified to analyse the potential role of the European forestry sector within climate mitigation. Improvements on database and modelling frameworks allow accounting for land heterogeneity across and within regions and for land transfers between agriculture, grazing, and forestry. The forestry sector has been modified to track carbon mitigation potential from both intensive and extensive forest margins, which have been calibrated according to a forest sectoral model. Two sets of climate policies are simulated. In a first scenario, Europe is assumed to commit unilaterally to reduce CO2 emissions by 20% and 30%, by 2020. In a second scenario, in addition to the emissions quotas, progressively higher forest sequestration subsidies are paid to European firms to foster the implementation of forestry practices. Results show that including forest carbon in the compliance strategy decreases European policy costs and carbon price, while it does not lead to significant reductions in carbon leakage. We conclude that while European forests can reinforce other mitigation measures, their contribution as a stand-alone abatement strategy results insufficient to comply with emissions reduction targets. Additionally, carbon sinks provided by European temperate forests do not offer considerable mitigation potential if compared with other forest biomes around the world. A much higher forest mitigation would require other regions to take part in a climate stabilization agreement, especially those where old-growth forests exist.
    Keywords: Climate Change, Climate Mitigation, General Equilibrium Modelling, Forestry
    JEL: D58 Q23 Q54 Q58
    Date: 2012–03
  7. By: Ha Vu
    Abstract: This paper estimates the role of labor market conditions in the recent decline in welfare receipt among the working age population in Australia. A stock-flow model is used, which involves modeling the underlying welfare flows and using the results to simulate the effect of labor market conditions on the welfare stock. The simulation analysis suggests that improvements in the labor market explain the majority of the decline. A range of robustness checks are undertaken including using alternative levels of geographic disaggregation to deal with likely measurement error in labor market data.
    JEL: C59 J11 I38
    Date: 2012–04
  8. By: Jaromir Benes; Alfredo Baldini; Mai Dao; Rafael Portillo; Andrew Berg
    Abstract: We develop a DSGE model with a banking sector to analyze the impact of the financial crisis on Zambia and the role of the monetary policy response. We view the crisis as a combination of three related shocks: a worsening in the terms of the trade, an increase in the country’s risk premium, and a decrease in the risk appetite of local banks. We characterize monetary policy as "stop and go": initially tight, subsequently loose. Simulations of the model broadly match the path of the economy during this period. We find that the initial policy response contributed to the domestic impact of the crisis by further tightening financial conditions. We study the factors driving the "stop" part of policy and derive policy implications for central banks in low-income countries.
    Date: 2012–04–05
  9. By: Lion Hirth (Vattenfall Europe AG)
    Abstract: The income that wind and solar power receive on the market is affected by the variability of their output. At times of high availability of the primary energy source, they supply electricity at zero marginal costs, shift the supply curve (merit-order curve) to the right and thereby reduce the equilibrium price of electricity during that hour. The size of this merit-order effect depends on the amount of installed renewable capacity, the slope of the merit-order curve, and the intertemporal flexibility of the electricity system. Thus the price of wind power falls with higher penetration rates, even if the average electricity price remains constant. This work quantifies the effect of variability on the market value of renewables using a calibrated model of the European electricity market. The relative price of German wind power (value factor) is estimated to fall from 110% of the average electricity price to 50% as generation increases from zero to 30% of total consumption. For solar power, the drop is even sharper. Hence competitiveness for large-scale renewables deployment will be more difficult to accomplish than often believed.
    Keywords: Wind Power, Solar Power, Electricity Market, Power Generation Economics, Renewables, Value Factor, Numerical Modelling
    JEL: Q42 O13 D24 D61
    Date: 2012–03
  10. By: Papa N'Diaye; Ashvin Ahuja
    Abstract: Hong Kong SAR was hit hard by the global financial crisis, which started out in the U.S. and spilled over to the rest of the world. Three years later, vulnerabilities in the euro area’s financial system and concerns over a hard landing in Mainland China have started to weigh on Hong Kong’s growth prospects. Against this backdrop, this paper aims to quantify the trade and financial spillovers on Hong Kong SAR’s economy from a downturn in the euro area and Mainland China. Based on simulations using a version of the Global Integrated Monetary and Fiscal (GIMF) model and a Global VAR (GVAR) that includes both balance sheet and standard macroeconomic indicators, Hong Kong SAR’s output growth could fall by as much as 1½ times the decline in euro area output growth given its high dependence on external trade and many links with the global financial system. A worsening of the crisis in the euro area could reduce Hong Kong SAR’s output by as much as 4-4½ percent below baseline during the first two years after the shock, pushing Hong Kong SAR back into recession and possible deflation. In the event of a hard landing in China, the model simulations suggest that Hong Kong SAR would be on a sustained downturn with output growth falling by about 3 percentage points below baseline in the first two years. Should these events materialize, countercyclical fiscal response could help cushion, but not fully offset, the impact of slower growth in the euro area or China.
    Keywords: Banks , China , Europe , External shocks , Financial crisis , Global Financial Crisis 2008-2009 , Hong Kong SAR , International trade , Spillovers ,
    Date: 2012–03–20
  11. By: Masaaki Fujii; Akihiko Takahashi
    Abstract: In this paper, we propose an efficient Monte Carlo implementation of non-linear FBSDEs as a system of interacting particles by developing a variant of marked branching diffusion method. It will be particularly useful to investigate large and complex systems, and hence it is a good complement of our previous work presenting an analytical perturbation procedure for generic non-linear FBSDEs. There appear multiple species of particles, where the first one follows the diffusion of the original underlying state, and the others the Malliavin derivatives with a grading structure. In contrast to the naive implementation of marked branching diffusion, the number of branches as well as interactions are efficiently suppressed by the properties of the perturbative expansion. This property will make the numerical implementation more feasible and stable. Furthermore, there is no need of direct approximation of the non-linear driver by a polynomial function. The proposed method can be applied to semi-linear problems, such as American and Bermudan options, Credit Value Adjustment (CVA), and even fully non-linear issues, such as the optimal portfolio problems in incomplete and/or constrained markets, feedbacks from large investors, and also the analysis of various risk measures.
    Date: 2012–04
  12. By: Abdelkrim Araar
    Abstract: This paper focusses on the theoretical and computational framework in order to estimate the impact of economic growth or that of the change in inequality on poverty. During the last few years, there was a growing interest to perform such estimations and to anticipate the implication of some strategic policies, that can be adopted to meet the Millennium Development Goal (MDG, henceforth), that is to cut poverty by half. As is illustrated in this paper, estimated poverty changes may be less precise or even wrong. Precisely, this bad estimation occurs when the distributive changes are non-marginal, whereas the used approach is based on the assumption of marginal changes. In an other case, and where the estimation is implicitly based on a parameterized model of the income distribution, results may be less precise when the predicted distribution cannot reproduce perfectly that derived with the sample. In this study, by using some popular methods, we have used some household surveys of the African countries, as well as, fictive data to show the error size that can occur. Further, we propose a new numerical method to allow to estimate accurately the impact of distributive changes on poverty.
    Keywords: Poverty, inequality, poverty elasticities, redistribution
    JEL: D63 I32 O12
    Date: 2012

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