New Economics Papers
on Computational Economics
Issue of 2012‒07‒14
nine papers chosen by

  1. CGE modeling of market access in services By Elisabeth Christen; Joseph Francois; Bernard Hoekman
  2. Equilibrium Simulation with Microeconometric Models: A New Procedure with an Application to Income Support Policies By Colombino, Ugo
  3. "Simulations of Full-Time Employment and Household Work in the Levy Institute Measure of Time and Income Poverty (LIMTIP) for Argentina, Chile, and Mexico" By Thomas Masterson
  4. An Exact Algorithm for Quadratic Integer Minimization using Nonconvex Relaxations By Christoph Buchheim; Marianna De Santis; Laura Palagi; Mauro Piacentini
  5. The Impact of Changes in JGB Yields on the Japanese Financial Institutions and the Real Economy: Simulation analysis using the Financial Macro-econometric Model (Japanese) By KAMADA Koichiro; KURACHI Yoshiyuki
  6. COLUMBUS - A global gas market model By Hecking, Harald; Panke, Timo
  7. A Real Options Model for Electricity Capacity Expansion By Joachim Gahungu and Yves Smeers
  8. Tight Volume Coupling: Analytical Model, Adverse Flow Causality and Potential Improvements By Tanguy Janssen, Yann Rebours and Philippe Dessante
  9. A Note on Particle Filters Applied to DSGE Models By Angelo Marsiglia Fasolo

  1. By: Elisabeth Christen; Joseph Francois; Bernard Hoekman
    Abstract: This paper examines how the applied multi-sector computable general equilibrium (CGE) literature has moved into quantification of the impacts of greater market access for services. This includes discussion of multisector linkages to the service sector, as well both measuring barriers to trade and investment (generally with a mix of firm surveys, price comparisons, and econometrics), and how changes in these barriers, however measured, have been implemented in the CGE literature. Three challenges are highlighted. The first is identification of how trade in services takes place and how market access is therefore affected by policy. A challenge is to find data sufficiently robust for modeling purposes. A third, linked to the data problem, is to quantify the barriers to be examined. Significant progress has been made in modeling FDI and linking this to productivity, which turns out to be important. The paper also provides an example of modeling productivity linkages to openness and domestic regulation, with an applied CGE model of Italy. This illustrates cross-sector linkages and the integration of economic data and policy measures to define service sector experiments. Priorities for future research include better modeling of market structure, the linkages between sectors and the complementarities between different modes of supplying services.
    Keywords: Trade in services, nontariff measures, nontariff barriers, regulation, FDI, productivity, liberalization, CGE
    JEL: F10
    Date: 2012–07
  2. By: Colombino, Ugo (University of Turin)
    Abstract: Many microeconometric models of discrete labour 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 statics 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 interpretation. Since the constants reflect the number of jobs and since the number of people willing to work changes as a response to the change in tax-transfer regime, the new equilibrium induced by the reform implies that the constants should also change. A structural interpretation of the alternative-specific constants leads to the development of a simulation procedure consistent with the comparative statics interpretation. The procedure is illustrated with a simulation of alternative reforms of the income support policies in Italy.
    Keywords: random utility, discrete choice, labour supply, policy simulation, alternative-specific constants, equilibrium simulation
    JEL: C35 C53 H31 J22
    Date: 2012–06
  3. By: Thomas Masterson
    Abstract: The method for simulation of labor market participation used in the LIMTIP models for Argentina, Chile, and Mexico is described. In each case, all eligible adults not working full-time were assigned full-time jobs. In all households that included job recipients, the time spent on household production was imputed for everyone included in the time-use survey. The feasibility of assessing the quality of the simulations is discussed. For each simulation, the recipient group is compared to the donor group, both in terms of demographic similarity and in terms of the imputed usual hours, earnings, and household production produced in the simulation. In each case, the simulations are of reasonable quality, given the nature of the challenges in assessing their quality.
    Keywords: Labor Force Simulation; Time Use; Household Production; Poverty; LIMTIP; Argentina; Chile; Mexico
    JEL: C14 C40 D31 J22
    Date: 2012–07
  4. By: Christoph Buchheim (Fakultat fur Mathematik, TU Dortmund); Marianna De Santis (Istituto di Analisi dei Sistemi e Informatica Antonio Ruberti – IASI CNR Roma); Laura Palagi (Department of Computer, Control, and Management Engineering Antonio Ruberti Sapienza Universita di Roma); Mauro Piacentini (Department of Computer, Control, and Management Engineering Antonio Ruberti Sapienza Universita di Roma)
    Abstract: We propose a branch-and-bound algorithm for minimizing a not necessarily convex quadratic function over integer variables. The algorithm is based on lower bounds computed as continuous minima of the objective function over appropriate ellipsoids. In the nonconvex case, we use ellipsoids enclosing the feasible region of the problem. In spite of the nonconvexity, these minima can be computed quickly. We present several ideas that allow to accelerate the solution of the continuous relaxation within a branch-and-bound scheme and examine the performance of the overall algorithm by computational experiments.
    Date: 2012
  5. By: KAMADA Koichiro; KURACHI Yoshiyuki
    Abstract: This paper analyzes the impact of an increase in Japanese government bonds (JGB) yields on the Japanese banks and the macro economy, based on the Financial Macro-econometric Model introduced by Ishikawa et al. (2011). When the yields on government bonds increase, banks incur unrealized losses in their bond holdings. The rise in government bonds yields also has a broad and recognizable impact on economic activities through an adverse feedback loop between the financial sector and the real economic sector. This paper simulates a situation in which the government bonds yields increase by one percentage point. According to the simulation results, the associated unrealized losses on bond holdings have only a limited impact on the Tier I ratio and would not substantially deteriorate the operations of the banking business. It should be noted, however, that the impact is lessened superficially by a number of "cushions," such as deferred tax assets and unrealized gains on bond holdings accumulated so far. This implies that as the rise in bond yields becomes larger, such cushion effects weaken relatively, and the impact of the yield change on the financial system and the real economy increases non-linearly.
    Date: 2012–06
  6. By: Hecking, Harald (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Panke, Timo (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: A model of the global gas market is presented which in its basic version optimises the future development of production, transport and storage capacities as well as the actual gas ows around the world assuming perfect competition. Besides the transport of natural gas via pipelines also the global market for lique ed natural gas (LNG) is modeled using a hub-and-spoke approach. <p> While in the basic version of the model an inelastic demand and a piecewise-linear supply function are used, both can be changed easily, e.g. to a Golombek style production function or a constant elasticity of substitution (CES) demand function. <p> Due to the usage of mixed complementary programming (MCP) the model additionally allows for the simulation of strategic behaviour of dierent players in the gas market, e.g. the gas producers.
    Keywords: Natural gas market; partial equilibrium modelling; MCP
    JEL: C61 L72 Q34 Q41
    Date: 2012–03–09
  7. By: Joachim Gahungu and Yves Smeers
    Abstract: This paper proposes a real option capacity expansion model for power generation with several technologies that differ in operation and investment costs. The economy is assumed perfectly competitive and the instantaneous payoff accruing from the generation system is the instantaneous welfare defined as the usual sum of consumer and producer surplus. The computation of this welfare requires the solution of a multi- technology optimization problem and the obtained optimal function value is not additively separable in generation capacities, contrary to what is generally assumed in multi asset real option models to prove the optimality of a myopic behavior. Using the geometric Brownian motion as uncertainty driver we propose two regression models to approximate the instantaneous welfare. A first, additively separable approximation implies the optimality of myopia. The second approximation is non separable and hence forces to take myopic behavior as an assumption. Using myopia as an assumption, we propose a semianalytic method which combines Monte Carlo simulations (used to compute the value of the marginal capacity) and analytical treatment (to solve an optimal stopping problem on a regression scheme).
    Keywords: Real options; capacity expansion; power investment; optimal dispatch
    Date: 2012–02–21
  8. By: Tanguy Janssen, Yann Rebours and Philippe Dessante
    Abstract: The European Market Coupling Company (EMCC) operates an interim tight volume coupling (ITVC) that implicitly allocates the interconnection capacities between Central West European (CWE) and Nordic (Nordpool) day-ahead electricity spot markets. Though it is to be replaced by a single price coupling in the near future, the volume coupling principle can still inspire pragmatic solutions for future challenges in other situations. In order to learn from the current experience, this paper offers elements of understanding on the interim volume coupling run by the EMCC that are not highlighted in the documents already available. In particular, a new analytical model of the tight volume coupling is developed to show that the ITVC principle would not generate any inefficiencies under three assumptions. This analysis thus offers a new perspective on the causality of adverse ow events. Furthermore, this model could be used to study other tight volume coupling mechanisms because it can be applied with minor modifications to any number of areas, other kinds of traded products or areas using a ow-based method. Learning from the ITVC experience, this paper proposes an example of improvement of the tight volume coupling method based on a stronger coordination between the numerical solvers. This improved mechanism could serve as an interim solution if a price coupling numerical solver does not provide satisfactory results because of the optimisation problem size or complexity. In this case, the proposed solution is expected to be a satisfactory implicit allocation method from both technical and governance points of view.
    Keywords: Volume coupling; market coupling; implicit allocation
    Date: 2012–03–09
  9. By: Angelo Marsiglia Fasolo
    Abstract: This paper compares the properties of two particle filters – the Bootstrap Filter and the Auxiliary Particle Filter – applied to the computation of the likelihood of artificial data simulated from a basic DSGE model with nominal and real rigidities. Particle filters are compared in terms of speed, quality of the approximation of the probability density function of data and tracking of state variables. Results show that there is a case for the use of the Auxiliary Particle Filter only when the researcher uses a large number of observable variables and the number of particles used to characterize the likelihood is relatively low. Simulations also show that the largest gains in tracking state variables in the model are found when the number of particles is between 20,000 and 30,000, suggesting a boundary for this number.
    Date: 2012–06

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