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on Computational Economics |
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Issue of 2012‒07‒23
24 papers chosen by |
| By: | Crescenzio Gallo; Michelangelo De Bonis; Pierpaolo Palazzo |
| Abstract: | Prediction of various market indicators is an important issue in finance. This can be accomplished through computer models and related applications to finance, and in particular through Artificial Neural Networks (ANNs) which have been used in stock market prediction and exchange rates during the last decade. The prediction of financial values (such as stock/exchange rate index as well as daily direction of change in the index) with neural networks has been investigated and, in some applications, it turned out that artificial neural networks have both great advantages and some limitations for learning the data patterns and predicting future values of the financial phenomenon under analysis. In this paper we analyze the particular financial market called FOREX and the way ANNs can make affordable predictions on the evolution of exchange rates between currencies. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:ufg:qdsems:02-2012&r=cmp |
| By: | Elisabeth M. 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. The second is to find data sufficiently robust for modeling purposes. The third, linked to the data problem, is to quantify the barriers to be examined. Significant progress has been made in modeling foreign direct investment 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: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2012_08&r=cmp |
| By: | Yunchol Jong |
| Abstract: | In this paper we consider an interval portfolio selection problem with uncertain returns and introduce an inclusive concept of satisfaction index for interval inequality relation. Based on the satisfaction index, we propose an approach to reduce the interval programming problem with uncertain objective and constraints into a standard linear programming problem with two parameters. We showed by simulation experiment that our method is capable of helping investors to find efficient portfolios according to their preference. |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1207.1932&r=cmp |
| By: | Jiun Hong Chan and Mark Joshi |
| Abstract: | We introduce a new approach to computing sensitivities of discontinuous integrals.The methodology is generic in that it only requires knowledge of the simulation scheme and the location of the integrand's singularities. The methodology is proven to be optimal in terms of minimizing the variance of the measure changes caused by the elimination of the discontinuities for finite bump sizes. An efficient adjoint implementation of the small bump-size limit is discussed, and the method is shown to be effective for a number of natural examples involving triggerable interest rate derivative securities. |
| Keywords: | Price Sensitivities, Monte-Carlo Greeks, Partial Proxy Simulation Scheme, Minimal Partial |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1142&r=cmp |
| By: | Chisari, Omar Osvaldo; Mastronardi, Leonardo Javier; Romero, Carlos Adrián |
| Abstract: | The aim of this paper is to analyze the spillover effects of national and local tax policies using a static bi-regional general equilibrium model for the Buenos Aires City (BAC) and the rest of Argentina. The BAC represents 7% of the population of the country, but 29% of its GDP. We analyze the reciprocal impact of fiscal policies on welfare of private agents and the spillover effects on the performance of the public sector of both regions. As expected, the model shows that national fiscal policies do have relevant effects on the activity level of the city and on the welfare of its inhabitants. However, more unexpectedly, it also shows that fiscal decisions at the level of the city have a significant impact on the rest of the country. The results show that: (i) an increase in BAC local taxes produce a decline in the welfare of households and in the activity levels, in both regions; (ii) an increase in national value added tax decreases the regional GDP in both regions, but in different proportions, and increases the regional unemployment rate. The results differ depending on the type of tax (sales or property). Production elasticities and the rule of indexation of wages are key factors that affect the quantitative and qualitative results. |
| Keywords: | Fiscal Federalism; Computable general equilibrium; Regional spillover effects |
| JEL: | H77 C68 D58 |
| Date: | 2012–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:40029&r=cmp |
| By: | Björnerstedt, Jonas; Verboven, Frank |
| Abstract: | We exploit a natural experiment associated with a large merger in the Swedish market for analgesics (painkillers). We confront the predictions from a merger simulation study, as conducted during the investigation, with the actual merger effects over a two-year comparison window. The merger simulation model is based on a constant expenditures specification for the nested logit model (as an alternative to the typical unit demand specification). The model predicts a large price increase of 34% by the merging firms, because there is strong market segmentation and the merging firms are the only competitors in the largest segment. The actual price increase after the merger is of a similar order of magnitude: +42% in absolute terms and +35% relative to the |
| Keywords: | analgesics; constant expenditures nested logit; ex post merger analysis; merger simulation |
| JEL: | L40 L41 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9027&r=cmp |
| By: | Derek M. Lemoine; Christian P. Traeger |
| Abstract: | We model welfare-maximizing policy in an infinite-horizon setting 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 specifications. 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 aversion increases the optimal carbon tax. |
| JEL: | C61 D81 D90 Q54 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18230&r=cmp |
| By: | Magliocca, Nicholas; McConnell, Virginia (Resources for the Future); Walls, Margaret (Resources for the Future); Safirova, Elena |
| Abstract: | This paper uses an economic agent-based model of land use in a hypothetical urban fringe community to examine the effects of large-lot zoning on land conversion, land prices, and the spatial configuration and density of new development. The model incorporates the actions of heterogeneous housing consumers, developers, and farmer/landowners who make economic decisions in land and housing markets. The model allows for population growth and simulates the evolution of land use patterns and prices over a 20-year time period. Zoning regulations in the form of minimum lot size restrictions imposed in an outlying area are shown to have effects that vary with the stringency of the regulations: 2-acre minimum lot sizes have little effect on the spatial patterns of development, but they do increase land and housing prices and result in higher incomes in the region; 5-acre minimum lot sizes push development toward the city center, leaving agricultural land in the zoned region undeveloped until quite late in the simulation period. While house prices are higher with 5-acre zoning, land prices in the zoned region fall, highlighting the countervailing influences of lot size restrictions on land prices. The new modeling approach allows for the tracking of the transitional dynamics of development, both over space and time as the urban area grows. |
| Keywords: | land use, agent-based model, zoning, urban sprawl |
| JEL: | R11 R12 R14 R38 |
| Date: | 2012–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-32&r=cmp |
| By: | Douillet, Mathilde |
| Abstract: | Global general equilibrium simulations of “regional” (within Sub-Saharan Africa –SSA-) and “multilateral” (Doha and preferential) trade integration are compared to assess policy reform priorities. Their coherence with the objective of agriculture-led industrialization is tested. New results reveal that for SSA regional integration delivers as much as multilateral integration. Multilateral liberalization drives Sub-Saharan African countries further away from agricultural-led industrialization. On the contrary regional integration fosters the production and trade of processed agricultural products. Regional integration has heterogeneous impacts on countries in SSA and gains might be concentrated on a few countries. Accompanying redistributive policies to compensate the loosers might help bring the negotiations further. |
| Keywords: | trade policy, market integration, agriculture, computable general equilibrium, trade preferences, Sub-Saharan Africa, Agribusiness, Agricultural and Food Policy, International Development, International Relations/Trade, Public Economics, F15, F47, O19, O24, O55, Q17, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126546&r=cmp |
| By: | Chisari, Omar O.; Romero, Carlos A.; Timilsina, Govinda |
| Abstract: | Argentina is one of the world's largest biodiesel producers and the largest exporter, using soybeans as feedstock. Using a computable general equilibrium model that explicitly represents the biofuel industry, this study carries out several simulations on two sets of issues: (i) international markets for biofuel and feedstock, such as an increase in prices of soybean, soybean oil, and biodiesel, and (ii) domestic policies related to biofuels, such as an introduction of biofuel mandates. Both sets of issues can have important consequences to the Argentinean economy. The simulations indicate that increases in international prices of biofuels and feedstocks would increase Argentina's gross domestic product and social welfare. Increases in international prices of ethanol and corn also can benefit Argentina, but to a lesser extent. The domestic mandates for biofuels, however, would cause small losses in economic output and social welfare because they divert part of biodiesel and feedstock from exports to lower-return domestic consumption. An increase in the export tax on either feedstock or biodiesel also would lead to a reduction in gross domestic product and social welfare, although government revenue would rise. |
| Keywords: | Economic Theory&Research,Energy Production and Transportation,Transport Economics Policy&Planning,Renewable Energy,Food&Beverage Industry |
| Date: | 2012–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6124&r=cmp |
| By: | James D. Reschovsky; Arkadipta Ghosh; Kate Stewart; Deborah Chollet |
| Abstract: | This issue brief evaluates the effects of a permanent 10 percent increase in Medicare fees for primary care ambulatory visits on Medicare costs. Using a simulation model with real-world parameters, the study found that, in spite of raising the overall cost of primary care visits, such a fee increase would yield more than a sixfold annual return in lower total Medicare costs—mostly for inpatient and postacute care—after the full effects on treatment patterns are realized. |
| Keywords: | Primary Care, Medicare, Cost Curve, Health Reform |
| JEL: | I |
| Date: | 2012–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:7400&r=cmp |
| By: | Hansen, James M.; Tuan, Francis C.; Somwaru, Agapi |
| Abstract: | This study analyzes the potential impact of climate change and the uncertainty of CO2 fertilization on China's corn, wheat and rice domestic agricultural markets and the international markets out to the year 2050. The study provides a brief background and reviews research literature of climate change effects on China's crop yields. The paper presents the potential impact of climate change on China's yields and attempts to quantify the domestic and global market impacts. The analysis has four scenarios, which assumes two future levels of greenhouse gas emissions with the effects of CO2 fertilization and no CO2 fertilization. A 27 country commodity partial equilibrium simulation mathematical programming model (PEATSim) is used for this analysis. Results indicate under CO2 fertilization, which increases yields, China's grain imports may decrease leading to a decrease in international prices. Under no CO2 fertilization, yields decrease, China's grain imports may increase leading to increased international prices. |
| Keywords: | China, trade, climate change, rice, wheat, corn, dynamic partial equilibrium simulation mathematical model., Crop Production/Industries, Environmental Economics and Policy, International Relations/Trade, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126878&r=cmp |
| By: | Blanco, Maria; Van Doorslaer, Benjamin; Britz, Wolfgang |
| Abstract: | Irrigation water use by agriculture has been identified as one of the major sustainable water management issues in the implementation of the Water Framework Directive (WFD). This paper aims at developing a simulation framework to jointly assess agricultural and water issues. While the strong linkages between water, food, and the environment call for an integrated and multidisciplinary modelling approach, a complete and consistent modelling system to evaluate food-water relationships in Europe was missing so far. The spatial economic simulation model for agriculture CAPRI, which comprises a set of environmental indicators to assess food-environment interrelations within European regions, has been extended to account for food-water links. This modelling framework enables simulating the potential impact of climate change and water availability on agricultural production at the EU regional level, as well as looking at the sustainable use of water, the implementation of water policies or the integration of water issues in the Common Agricultural Policy. |
| Keywords: | agricultural policy, agro-economic modelling, food-water linkages, bioeconomy, Agricultural and Food Policy, Environmental Economics and Policy, C60, Q11, Q18, |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaa126:126031&r=cmp |
| By: | Marenya, Paswel Phiri; Nkonya, Ephraim M.; Xiong, Wei; Rossel, Jose Deustua; Edward, Kato |
| Abstract: | Why do many smallholder farmers fail to adopt improved land-use practices which can improve yields and incomes? The reason is not always because these practices are uneconomical but sometimes it is because resource poverty prevents farmers from taking advantage of yield and income enhancing agricultural practices. In this study we examine the relative merits of using a carbon payment scheme compared to a subsidy policy to help reduce the cost of specific best management practices (BMPs) with productivity and ecosystem benefits. Using a 30-year crop simulation model, we examine the impacts of different soil fertility management treatments (SFTs) on yields and soil carbon and proceed to compute discounted incremental revenue streams over the same period. We find that the SFTs simulated are on average profitable given the conditions assumed in the DSSAT simulations and subsequent net present value analysis and revenue-cost comparisons. When carbon was priced at $8 or $12/t, the increase in incremental incomes generated from a carbon payment were higher than those imputed from a 50% fertilizer subsidy. When carbon was priced at $4/t, the increase was almost always equal and sometimes higher than that from the imputed income transfer from a 50% subsidy. If these indications hold in further research, it could imply that using fertilizer subsidies as the sole mechanism for stimulating adoption of improved soil fertility management practices may unnecessarily forgo other complementary and possibly superior alternatives. Given the fiscal burden on public finances and unavoidable opportunity costs of any substantial subsidy program, it is possible that a carbon payment system is a reasonable alternative even at low carbon prices especially if accompanied by measures to ameliorate the costs of fertilizer to farmers. |
| Keywords: | fertilizer subsidy, carbon payments, sub-Saharan Africa, Farm Management, International Development, Land Economics/Use, Research and Development/Tech Change/Emerging Technologies, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126904&r=cmp |
| By: | Rault, Arnaud |
| Abstract: | Foot and Mouth disease, like other epizootic outbreaks, can have wide and lasting impacts exceeding the agricultural field. Within Europe various ad hoc policies exist to cope with these consequences. In this paper we develop a dynamic CGE model allowing us to simulate a FMD outbreak, its economic consequences and the effect of the implementation of a mutual fund as a structural risk management policy. Our results show that a financial support to farmers thanks to the mutual fund may encourage a quicker recovery from the market losses, especially helping to rebuild the cattle herds after a period of trade bans. However, counterproductive effects may be encountered in the case of mandatory participation of farmers to finance the mutual fund. |
| Keywords: | dynamic CGE, catastrophic event, animal disease, risk management policy, Agricultural and Food Policy, Agricultural Finance, Risk and Uncertainty, Q11, Q18, |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaa126:125994&r=cmp |
| By: | Mueller, Marc; Ferrari, Emanuele |
| Abstract: | Agricultural polices in the EU are increasingly targeting not only the agricultural sector but also other economic branches. The indirect effects of these policies, as the rural development ones, might be as important as the direct ones, mainly on factor markets as labour. In addition, in order to better scale the adopted agricultural measures, policy makers are devoting more attention to the regionalized impacts of these policies. For these reasons, a pure partial-equilibrium agricultural model is not enough to account the effects of the EU agricultural policies. The development of regionalized Computable General Equilibrium models and the linkages with already developed regionalized agricultural partial equilibrium models is a fundamental step for agricultural economists. The greatest challenge to build a regional general equilibrium model for all EU27 NUTS2 regions is the database construction. This work show the main steps needed to construct such a database, called IOTNUTS2. |
| Keywords: | regional input-output tables, non-survey method, location quotient, European Union, Agricultural and Food Policy, D57, R10, O52, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126942&r=cmp |
| By: | Burtraw, Dallas (Resources for the Future); Palmer, Karen (Resources for the Future); Paul, Anthony (Resources for the Future); Woerman, Matt (Resources for the Future) |
| Abstract: | The confluence of several pending environmental rulemakings will require billions of dollars of investment across the industry and changes in the operation of facilities. These changes may lead to retirement of some facilities, and there has been much debate about their potential effects on electricity reliability. Only very exceptional circumstances would trigger supply disruptions; however, the changes may affect electricity prices, the generation mix, and industry revenues. Coincident with these new rules, expectations about natural gas prices and future electricity demand growth are changing in ways that also will have substantial effects on the industry. This paper addresses these two sets of issues using a detailed simulation model of the U.S. electricity market. The findings suggest that recent downward adjustments in natural gas prices and electricty demand projections have a substantially larger impact on electricity prices and generation mix than do the new environmental rules. |
| Keywords: | air pollution, electricity, regulation, equilibrium model |
| JEL: | Q41 Q52 Q58 |
| Date: | 2012–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-12-15&r=cmp |
| By: | Kimura, Shingo; Anton, Jesus; Cattaneo, Andrea |
| Abstract: | There is growing concern about the impact of climate change on agriculture and the potential need for better risk management instruments that respond to a more risky environment. This is based on the widespread assumption that climate change will increase weather and yield variability and will expose farmers to higher levels of risk. But it is not obvious what will be the net impact of those on the distribution of yields and its correlation with weather indexes. Five stylized scenarios for crop yields are built on the basis of the available empirical information: baseline, marginal climate change without adaptation, with adaptation and with misalignment of expectations, and an extreme events scenario. A micro simulation model is calibrated using micro farm level data from the Canadian province of Saskatchewan. Four alternative policy measures are analyzed: three types of subsidized insurance (individual yield, area-yield and weather index) and an ex post disaster payment. Results on insurance uptake, budgetary costs and impacts on diversification, farmers’ welfare and farm income variability, are presented for three different types of farms. The paper goes beyond indentifying the effectiveness of risk management instruments under stylized climate change scenario and analyze the policy decision criteria when policy makers face ambiguous climate change contingencies. |
| Keywords: | climate change, crop insurance, risk management and weather index insurance, Crop Production/Industries, Environmental Economics and Policy, Risk and Uncertainty, D81 / Q12, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126736&r=cmp |
| By: | Berrittella, Maria; Zhang, Jian |
| Abstract: | Recent global initiatives on debt relief and development assistance call for increasing aid for trade to the poorest countries. The paper applies a multi-country computable general equilibrium model to measure the effectiveness of alternative aid for trade categories. The findings show that aid for trade policies expand trade and alleviate international income inequalities in the recipient countries, that will benefit mainly from aid for trade adjustment and technical assistance. |
| Keywords: | Economic Theory&Research,Environmental Economics&Policies,Emerging Markets,Inequality,Labor Policies |
| Date: | 2012–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6126&r=cmp |
| By: | Quamrul Ashraf; Boris Gershman; Peter Howitt |
| Abstract: | We use an agent-based computational approach to show how inflation can worsen macroeconomic performance by disrupting the mechanism of exchange in a decentralized market economy. We find that increasing the trend rate of inflation above 3 percent has a substantial deleterious effect, but lowering it below 3 percent has no significant macroeconomic consequences. Our finding remains qualitatively robust to changes in parameter values and to modifications to our model that partly address the Lucas critique. Finally, we contribute a novel explanation for why cross-country regressions may fail to detect a significant negative effect of trend inflation on output even when such an effect exists in reality. |
| JEL: | C63 E00 E31 E50 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18225&r=cmp |
| By: | Gelan, Ayele; Engida, Ermias; Caria, A. Stefano; Karugia, Joseph Thuo |
| Abstract: | Researchers and policymakers increasingly recognize that the livestock sector supports the livelihoods of a large proportion of rural households in most African countries and may have an important role to play in rural poverty reduction strategies. In order to develop this insight, economywide models should capture both the biological, dynamic relationships between the stocks and flows of livestock and the economic linkages between the sector and the rest of the economy. We extend an existing dynamic recursive general equilibrium model for the Ethiopian economy which better models the livestock sector. A separate herd dynamics module enables us to specify stock-flow relationship, distinguishing between the capital role of livestock and the flow of livestock products. We also improve the underlying system of economic accounts, to better capture draft power and breeding stocks. We use this model to simulate separate, realistic Total Factor Productivity (TFP) shocks to three agricultural subsectors—cereals, cash crops, and livestock—and compare them with a baseline scenario replicating the 1998 to 2007 productivity trends, following Dorosh and Thurlow (2009) who have examined CAADP productivity scenarios. The results we obtain reveal the important role of the livestock sector in increasing various measures of GDP and combating food insecurity. Agricultural GDP and overall GDP growth levels achieved in the livestock TFP shock scenario are very similar to those achieved in the cereal TFP shock scenario, unlike what previously thought. Importantly, as factors are dynamically re-allocated between agricultural activities, our analysis highlights the inefficiency of strategies focusing on cereal sector development alone. Moreover, livestock sector productivity growth leads to greater factor income growth, particularly labor income, than in the other simulations. Labor is the predominant asset of poor households and hence large income gains and food consumption growth are realized under the livestock-led scenario. |
| Keywords: | Agricultural Finance, Livestock Production/Industries, Research Methods/ Statistical Methods, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126800&r=cmp |
| By: | Ludena, Carlos E.; Mejia, Carla |
| Abstract: | This paper analyses the impacts of climate change of food processing sectors worldwide. Specifically, we analyze the impacts that changes in agricultural productivity might have for seven food industry sectors, namely meat, vegetable oils and fats, dairy, sugar, processed rice, other food products and beverage and tobacco products. We analyze two different scenarios of crops yield changes based on Müller et al. (2009), one with full CO2 fertilization and one without CO2 fertilization. We use a general equilibrium approach, given the advantages that this methodology provides for worldwide analysis of productivity and its impacts on production, trade and prices of primary agriculture, and ultimately, food processing sectors. We use the GTAP computable general model with version 7 of the GTAP database, with a base year of 2004. We aggregate this database into 10 regions and 12 sectors, with special emphasis on food processing sectors. The results show that overall, the impacts on food processing depends whether we consider CO2 fertilization or not. |
| Keywords: | Climate change, productivity, agriculture, food industry, Crop Production/Industries, Production Economics, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126851&r=cmp |
| By: | Burrell, Alison M.; Ferrari, Emanuele; Mallado, Aida Gonzalez; Michalek, Jerzy |
| Abstract: | This paper examines how EU trade flows and production values are affected by introducing special treatment for developed countries’ sensitive products into a potential DDA agreement. In particular, it explores how the EU’s decisions regarding the size of the tariff cut for sensitive products and the corresponding size of TRQ expansion affect its protection levels, its own GDP and that of other countries and regions. It is assumed that the EU’s management of its sensitive product regime aims to maintain farm incomes and production values, rather than to minimise import access. A novelty of the paper is that it explores the extent to which achieving this aim depends on similar decisions taken by other developed countries. The simulation tool used to analyse thirteen scenarios, with a time horizon of 2020, is the global Computable General Equilibrium model GLOBE. Results indicate that the lowest tariff cuts for sensitive products may not necessarily lead to the smallest decrease in agricultural production. Moreover, the interdependencies between the sensitive product choices of developed countries are considerable. The extent to which EU management decisions relating to sensitive products matter for the impact of a DDA agreement on third countries’ GDP is also examined. |
| Keywords: | International Development, International Relations/Trade, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:126950&r=cmp |
| By: | Martin Dózsa (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jakub Seidler (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This article presents structural asset pricing model with stochastic interest rate and default barrier based on the evolution of the firm' Earning Before Interest and Taxes (EBIT). This framework is further enhanced by the game theory analysis which examines the negotiation between shareholders and creditors with respect to the debt of the company and its safety covenants serving as the default trigger. As a result, this complex framework allows toanalyse different optimal capital structures of the company and its default probability dependent on the changes in the risk-free interest rate, which may also represent the current state of the economy. As the numerical computations show this approach is more convenient than the constant default barrier framework used in the currently available literature. |
| Keywords: | credit contracts, stochastic default barrier, asset pricing, EBIT-based models, structural models |
| JEL: | C73 G12 G32 G33 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2012_17&r=cmp |