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on Computational Economics |
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Issue of 2012‒08‒23
twelve papers chosen by |
| By: | Mishra, SK |
| Abstract: | This paper proposes a novel method of global optimization based on cuckoo-host co-evaluation. It also develops a Fortran-77 code for the algorithm. The algorithm has been tested on 96 benchmark functions (of which the results of 30 relatively harder problems have been reported). The proposed method is comparable to the Differential Evolution method of global optimization. |
| Keywords: | Cuckoo-Host Co-Evolution; Cuckoo Search; Global Optimization; Differential Evolution; Levy flight; Benchmark functions |
| JEL: | C63 C87 C61 |
| Date: | 2012–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:40615&r=cmp |
| By: | Tom Holden; Michael Paetz |
| Abstract: | This paper presents a fast, simple and intuitive algorithm for simulation of linear dynamic stochastic general equilibrium models with inequality constraints. The algorithm handles both the computation of impulse responses, and stochastic simulation, and can deal with arbitrarily many bounded variables. To illustrate the usefulness and efficiency of this algorithm we provide two applications according to the zero lower bound (ZLB) on nominal interest rates. Our solution principle is much faster than comparable methods. We therefore expect this algorithm to be very helpful also for estimation procedures, and for a wide range of applications apart from monetary policy analysis. |
| Keywords: | inequality constraints, zero lower bound, DSGE model, New Keynesian framework, two-country models |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:ham:qmwops:21207b&r=cmp |
| By: | Daisuke Ishikawa (Policy Research Institute, Ministry of Finance Japan); Junji Ueda (Policy Research Institute, Ministry of Finance Japan); Real Arai (Graduate School of Social Sciences, Hiroshima University) |
| Abstract: | In order to quantify the effects of declining birthrate and changing demographic structure on the Japanese economy, we show the results of simulations by using a multi-sector dynamic general equilibrium model with overlapping generations (OLG) in an open economy. The model is constructed to incorporate substitutability between domestic products and imports and show the evolution of the industrial structure, reflecting the impacts of aging population from both supply and demand sides of the economy. Based on the scenario of increasing public demands for healthcare services, the share of healthcare sector expands to almost 2.5 times in 2050 relative to the base year 1985. The result of a simulation based on an alternative scenario where the government increases net transfer to the elderly shows smaller labor participation and GDP per capita, due to the income effects and crowding out of private capital by the increase of government debt outstanding in the long run. |
| Keywords: | multi-sector OLG model, demographic change, soaring public healthcare spending |
| JEL: | J11 H51 H68 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:mof:wpaper:ron243&r=cmp |
| By: | George Verikios; Xiao-guang Zhang |
| Abstract: | We analyse structural changes in the Australian ports and rail freight industries during 1990s that were driven by microeconomic reform. We estimate the direct and indirect effects on household income groups of these industry changes by applying a computable general equilibrium model incorporating detailed household income and expenditure accounts, and microsimulation behaviour. The model contains both top-down and bottom-up linkages. The structural changes lead to a small increase in household welfare in most regions, with an overall increase of 0.18%. Income inequality is estimated to have decreased slightly by 0.02%. |
| Keywords: | computable general equilibrium, household income distribution, microeconomic reform, microsimulation, ports, rail freight |
| JEL: | C68 C69 D31 L92 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-230&r=cmp |
| By: | Hertel, Thomas |
| Abstract: | Contributed Chapter for Peter B. Dixon and Dale W. Jorgenson (eds.) This chapter provides an overview of the first two decades of the Global Trade Analysis Project (GTAP) - an effort to support a standardized data base and CGE modeling platform for international economic analysis. It characterizes GTAP in four different dimensions: institutional innovation, a network, a database and a standardized modeling platform. Guiding principles for the GTAP modeling framework include flexibility, ease of use, transparency, and symmetric treatment of production and utility fundamentals across regions. The chapter reviews core modeling assumptions relating to the regional household, private consumption behavior, welfare decomposition, the "global bank", treatment of the international trade and transport sector, and imports. Model validation and sensitivity analysis, as well as software issues receive attention as well. The chapter also offers brief overviews of major the two major areas of application: international economic integration and global environmental issues. It closes a discussion of future directions for the Project. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:3751&r=cmp |
| By: | Joaquim Bento de Souza Ferreira Filho; Mark Horridge |
| Abstract: | Agriculture area and production has expanded greatly in Brazil during the last 40 years. The area of annual crops almost doubled, while the area planted for pastures and forestry tripled. However, the rate of deforestation has considerably reduced since 2004. In this paper we analyze the effect of slower forest clearing on food supply and the economy in Brazil, in the presence of increasing world food prices. A multi-period computable general equilibrium model, based on previous work of the authors, is used to analyze the importance of endogenous land supply for agriculture in Brazil. The model includes annual recursive dynamics and a detailed bottom-up regional representation, which for the simulations reported here distinguished 15 aggregated Brazilian regions. It also has 36 sectors, 10 household types, 10 labor grades, and a land use change (LUC) module which tracks land use in each state. The core database is based on the 2005 Brazilian Input-Output model. The LUC model is based on a transition matrix calibrated with data from the Agricultural Censuses of 1995 and 2006, which shows how land use changed across different uses (crops, pastures, forestry and natural forests) between those years. This transition matrix is used to project the deforestation rate (or the increase in total land supply) in the baseline scenario, for the period 2005-2025. Results show that a halt in deforestation would decrease Brazilian GDP by about 0.5% in 2025, compared to a baseline which allows deforestation to continue. But there are redistributive effects that policies may need to counteract: regional GDPs would decrease by as much as 6% for states on the agricultural frontier, and food prices rise by around 2%, slightly raising the cost of living for poorer households. <br /> |
| Keywords: | CGE, food prices, land use, Brazil |
| JEL: | C68 D58 E47 Q15 Q16 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-229&r=cmp |
| By: | Kirill Vaninsky; Stepan Myzuchka; Alexander Lukov |
| Abstract: | We introduce and treat rigorously a new multi-agent model of the limit order book. Our model is designed to explain a behavior of the market when new information a?ecting the market arrives. Our model has two major features. First, it constitutes a nonlinear Markov process. Second, it has two additional parameters which we call slow parameters. These parameters measure mood of two groups of investors, namely, bulls and bears. We explain the intuition behind the equations and present numerical simulations which show that behavior of the model is similar to the behavior of the real market. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1208.3083&r=cmp |
| By: | Hans M. Amman; David A. Kendrick |
| Abstract: | In the economics literature there are two dominant approaches for solving models with optimal experimentation (also called active learning). The first approach is based on the value function and the second on an approximation method. In principle the value function approach is the preferred method. However, it suffers from the curse of dimensionality and is only applicable to small problems with a limited number of policy variables. The approximation method allows for a computationally larger class of models, but may produce results that deviate from the optimal solution. Our simulations indicate that when the effects of learning are limited, the differences may be small. However, when there is sufficient scope for learning, the value function solution is more aggressive in the use of the policy variable. |
| Keywords: | design of fiscal policy, optimal experimentation, stochastic optimization, time-varying parameters, numerical experiments. |
| JEL: | C63 E61 E62 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:1209&r=cmp |
| By: | Andrew Feltenstein (Andrew Young School of Policy Studies, Georgia State University); Musharraf Cyan (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | This study develops a dynamic general equilibrium model, applied to Pakistani data, in which optimizing agents evade taxes by operating in the underground economy. The cost to firms of evading taxes is that they find themselves subject to credit rationing from banks. Our model simulations show that in the absence of budgetary flexibility to adjust expenditures, raising tax rates too high drives firms into the underground economy, thereby reducing the tax base. Aggregate investment in the economy is lowered because of credit rationing. Taxes that are too low eliminate the underground economy, but result in unsustainable budget and trade deficits. Thus, the optimal rate of taxation, from a macroeconomic point of view, may lead to some underground activity. We note, in particular, that incorporating a VAT without any other tax reductions greatly reduces the tax compliance of the service sector. We have applied our model to Pakistan, and have calibrated our model to an 8 year period from 2004-2011. We note that it gives a reasonable approximation of Pakistani macro data. We then use a sectoral breakdown of tax data generated by the model to estimate tax gaps on a sector by sector basis. We note that certain sectors are currently paying taxes below their potential, while others may be above their tax potential. These sectoral gap estimates may be used as indicators of where greater tax enforcement efforts should be directed. |
| Date: | 2012–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1226&r=cmp |
| By: | Juan Antonio Zapata; Carlos Gabriel Rivas; Alejandro Melandri |
| Abstract: | This is the context in which this study has been designed, which proposes a discussion of the fundamentals of employing a mechanism based on the use of financial hedging instruments to mitigate the impact of oil price volatility on the cost of oil derivatives. For the purpose of contributing to the consideration of alternatives, the possibility of supplementing these financial instruments with the implementation of price stabilization funds is also examined, in view of some existing experiences with the latter in the region. The document seeks to support the analysis by modeling the possible results of applying these mechanisms to a regional economy. To this end, the authors received the assistance and collaboration of authorities and officials from the Government of Peru, which made it possible to base the modeling exercise on the behavior of real regional market variables. Furthermore, the study simulates a price stabilization scheme "suggested" for such market aimed at mitigating the volatility of the prices of oil refinery by-products, and quantifies the possible results on the basis of a simplified theoretical simulation. The purpose of this study is to serve as a basic working paper, the main aim of which is to open a window of interest and support a dialogue on the application of stabilization mechanisms that help discuss specific proposals, analyze regulatory frameworks, and develop models to be applied to the price of oil and its derivatives in the countries of the region. |
| Keywords: | Energy & Mining :: Petroleum, Coal & Natural Gas, Energy & Mining :: Energy Markets, Financial Sector :: Financial Markets, Simulation, financial instruments, derivatives |
| JEL: | G14 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:75298&r=cmp |
| By: | De Luca, Giuseppe (ISFOL); Rossetti, Claudio (LUISS Guido Carli University); Vuri, Daniela (University of Rome Tor Vergata) |
| Abstract: | This paper investigates labor supply and redistributive effects of in-work benefits for Italian married couples using a tax-benefit microsimulation model and a multi-sectoral discrete choice model of labor supply. We consider two in-work benefit schemes following the key principles of the Earned Income Tax Credit (EITC) and the Working Tax Credit (WTC) existing in the US and the UK, respectively. The standard design of these in-work benefits is however augmented with a new benefit premium for two-earner households in order to overcome the well-known disincentive effects that these welfare instruments may generate on secondary earners. In simulation, the proposed in-work benefits are financed through the abolition of Italian family allowances for dependent employees and contingent workers thus ensuring tax revenue neutrality. We show that our EITC and WTC reforms have strong positive effects on labor supply of wives, weak negative effects on labor supply of husbands, and strong positive effects on equity. The EITC is more effective than the WTC in boosting employment of wives, while the WTC is more effective than the EITC in fighting poverty. In both schemes, the trade-off between labor supply incentives and redistributive effects is crucially related to the new benefit premium for two-earner households. Other things being equal, tax revenue neutrality implies that a higher value of this policy coefficient yields stronger incentive effects and weaker redistributive effects. |
| Keywords: | in-work benefits, multi-sectoral labor supply, poverty, microsimulation, married couples, Italian tax-benefit system |
| JEL: | I38 H31 H53 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6739&r=cmp |
| By: | Beomsoo Park; Benjamin Van Roy |
| Abstract: | We consider a model in which a trader aims to maximize expected risk-adjusted profit while trading a single security. In our model, each price change is a linear combination of observed factors, impact resulting from the trader's current and prior activity, and unpredictable random effects. The trader must learn coefficients of a price impact model while trading. We propose a new method for simultaneous execution and learning - the confidence-triggered regularized adaptive certainty equivalent (CTRACE) policy - and establish a poly-logarithmic finite-time expected regret bound. This bound implies that CTRACE is efficient in the sense that the ({\epsilon},{\delta})-convergence time is bounded by a polynomial function of 1/{\epsilon} and log(1/{\delta}) with high probability. In addition, we demonstrate via Monte Carlo simulation that CTRACE outperforms the certainty equivalent policy and a recently proposed reinforcement learning algorithm that is designed to explore efficiently in linear-quadratic control problems. |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1207.6423&r=cmp |