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on Computational Economics |
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Issue of 2013‒01‒07
seventeen papers chosen by |
| By: | Christopher Heiberger (University of Augsburg, Department of Economics); Torben Klarl (University of Augsburg, Department of Economics); Alfred Maussner (University of Augsburg, Department of Economics) |
| Abstract: | Many algorithms that provide approximate solutions for dynamic stochastic general equilibrium (DSGE) models employ the generalized Schur factorization since it allows for a flexible formulation of the model and exempts the researcher from identifying equations that give raise to infinite eigenvalues. We show, by means of an example, that the policy functions obtained by this approach may differ from those obtained from the solution of a properly reduced system. As a consequence, simulation results may depend on the numeric values of parameters that are theoretically irrelevant. The source of this inaccuracy are ill-conditioned matrices as they emerge, e.g., in models with strong habits. Therefore, researchers should always cross-check their results and test the accuracy of the solution. |
| Keywords: | DSGE Models, Schur Factorization, System Reduction, Accuracy of Solutions |
| JEL: | C32 C63 E37 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0320&r=cmp |
| By: | Francesco Bertoluzzo (Department of Economics, University Ca’ Foscari of Venice); Marco Corazza (Department of Economics, University Ca’ Foscari of Venice) |
| Abstract: | The construction of automatic Financial Trading Systems (FTSs) is a subject of research of high interest for both academic environment and financial one due to the potential promises by self-learning methodologies and by the increasing power of actual computers. In this paper we consider Reinforcement Learning (RL) type algorithms, that is algorithms that optimize their behavior in relation to the responses they get from the environment in which they operate, without the need for a supervisor. In particular, first we introduce the essential aspects of RL which are of interest for our purposes, then we present some original automatic FTSs based on differently configured RL algorithms and apply such FTSs to artificial and real time series of daily financial asset prices. |
| Keywords: | Financial Trading System; Reinforcement Learning; Stochastic control; Q-learning algorithm; Kernel-based Reinforcement Learning. |
| JEL: | C61 C63 D83 G11 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2012:33&r=cmp |
| By: | K. Vela Velupillai |
| Abstract: | In this paper, in homage to Alan Turing’s birth centennial, I try to develop what may be called Turing’s Economics. I characterize the contents of such an ‘economics’ in terms of the conceptual and mathematical tools developed by Alan Turing. It is shown, in more and less detail, how these concepts and tools could be used in core areas of economic theory to raise fundamental queries on claims of computability – and answer them precisely. The conclusion is that the field of Turing’s Economics would – should – contribute to a reorientation of economics in the direction of serious considerations of mathematical epistemology |
| Keywords: | Computability, Problem Solving, Undecidability, Epistemology, Computational economics |
| JEL: | B41 C63 C65 C68 D58 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpas:1224&r=cmp |
| By: | Michele PEZZONI (University of Milano-Bicocca - KiTES-Università Bocconi - Observatoire des Sciences et des Techniques); Francesco LISSONI (GREThA, CNRS, UMR 5113 - KiTES); Gianluca TARASCONI (KiTES, Università Bocconi) |
| Abstract: | Inventor disambiguation is an increasingly important issue for users of patent data. We propose and test a number of refinements to the Massacrator© algorithm, originally proposed by Lissoni et al. (2006) and now applied to APE-INV, a free access database funded by the European Science Foundation. Following Raffo and Lhuillery (2009) we describe disambiguation as a 3-step process: cleaning&parsing, matching, and filtering. By means of sensitivity analysis, based on MonteCarlo simulations, we show how various filtering criteria can be manipulated in order to obtain optimal combinations of precision and recall (type I and type II errors). We also show how these different combinations generate different results for applications to studies on inventors\' productivity, mobility, and networking. The filtering criteria based upon information on inventors\' addresses are sensitive to data quality, while those based upon information on co-inventorship networks are always effective. Details on data access and data quality improvement via feedback collection are also discussed. |
| Keywords: | patent data, inventors, name disambiguation |
| JEL: | C15 C81 O34 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2012-29&r=cmp |
| By: | David Berre (IESEG School of Management (LEM-CNRS) and University of Lille, CIRAD, UMR SELMET, Lille); Jonathan Vayssières (CIRAD, UMR SELMET, Dakar, Sénégal); Jean-Philippe Boussemart (University of Lille 3 and IESEG School of Management (LEM-CNRS)); Hervé Leleu (CNRS-LEM and IESEG School of Management); Emmanuel Tillard (CIRAD, UMR SELMET, Saint-Pierre, La Réunion, France) |
| Keywords: | Simulation model, Optimization model, Data Envelopment Analysis, efficiency, dairy farming systems |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e201216&r=cmp |
| By: | Karen Thierfelder (United States Naval Academy); Scott McDonald (Oxford Brookes University) |
| Abstract: | This paper provides a technical description of a global computable general equilibrium (CGE) model that is calibrated from a Social Accounting Matrix (SAM) representation of the Global Trade Analysis Project (GTAP) database. An important feature of the model is the treatment of nominal and real exchange rates and hence the specification of multiple numéraire. Another distinctive feature of the model is the use of a ‘dummy’ region, known as globe, that allows for the recording of inter-regional transactions where either the source or destination are not identified. |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:usn:usnawp:39&r=cmp |
| By: | Lengnick, Matthias; Krug, Sebastian; Wohltmann, Hans-Werner |
| Abstract: | The authors pick up the standard textbook approach of money creation and develop a simple agent-based alternative. They show that their model is well suited to explain the endogenous creation of money. Although more general, their model still contains the standard results as a limiting case. The authors also uncover a potential instability that is hidden in the standard approach but easily recognized within a strict individual-based and stock-flow consistent version. They show in detail how individual interactions build up systemic risk and how banking crises are triggered by the maturity mismatch of different cash-flows and spread by the depreciation of non-performing loans (e.g. interbank or government debt). -- |
| Keywords: | financial instability,endogenous money,agent-based macroeconomics,stock-flow consistency,disequilibrium analysis |
| JEL: | E42 E51 C63 G01 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201261&r=cmp |
| By: | Funke , Michael (BOFIT); Paetz , Michael (BOFIT) |
| Abstract: | This paper evaluates various financial system reform initiatives and proposals in China in a DSGE modelling setting. The key reform steps analysed include phasing out benchmark interest rates, deepening the direct finance market, reducing government’s quantity-based intervention on financial institutions. Our counterfactual model simulation results suggest that the reforms will be beneficial only, if Chinese monetary policy continues to rely on quantity-based interventions on financial institutions or tightens the interest rate rule. |
| Keywords: | DSGE model; financial sector reform; monetary policy; China |
| JEL: | E42 E52 E58 |
| Date: | 2012–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2012_030&r=cmp |
| By: | Pieters, A.; Oorschot, K.E. van (Tilburg University); Akkermans, H.A. (Tilburg University) |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-5661541&r=cmp |
| By: | Adrian Peralta-Alva; Manuel S. Santos |
| Abstract: | This paper provides a general framework for the quantitative analysis of stochastic dynamic models. We review convergence properties of some numerical algorithms and available methods to bound approximation errors. We then address convergence and accuracy properties of the simulated moments. Our purpose is to provide an asymptotic theory for the computation, simulation-based estimation, and testing of dynamic economies. The theoretical analysis is complemented with several illustrative examples. We study both optimal and non-optimal economies. Optimal economies generate smooth laws of motion defining Markov equilibria, and can be approximated by recursive methods with contractive properties. Non-optimal economies, however, lack existence of continuous Markov equilibria, and need to be computed by other algorithms with weaker approximation properties. |
| Keywords: | Error analysis (Mathematics) ; Markov processes |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2012-062&r=cmp |
| By: | Takashi Kano; James M. Nason |
| Abstract: | We study the implications of internal consumption habit for new Keynesian dynamic stochastic general equilibrium (NKDSGE) models. Bayesian Monte Carlo methods are employed to evaluate NKDSGE model fit. Simulation experiments show that internal consumption habit often improves the ability of NKDSGE models to match the spectra of output and consumption growth. Nonetheless, the fit of NKDSGE models with internal consumption habit is susceptible to the sources of nominal rigidity, to spectra identified by permanent productivity shocks, to the choice of monetary policy rule, and to the frequencies used for evaluation. These vulnerabilities indicate that the specification of NKDSGE models is fragile. |
| Keywords: | Consumption (Economics) ; Keynesian economics |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:12-30&r=cmp |
| By: | Samuel Drapeau; Michael Kupper; Antonis Papapantoleon |
| Abstract: | We consider the class of risk measures associated with optimized certainty equivalents. This class includes several popular examples, such as CV@R and the entropic risk measure. We develop numerical schemes for the computation of such risk measures using Fourier transform methods. This leads to a very competitive method for the calculation of CV@R in particular, which is comparable in computational time to the calculation of V@R. |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1212.6732&r=cmp |
| By: | Cassio Neri; Lorenz Schneider |
| Abstract: | In Neri and Schneider (2012) we presented a method to recover the Maximum Entropy Density (MED) inferred from prices of call and digital options on a set of n strikes. To find the MED we need to numerically invert a one-dimensional function for n values and a Newton-Raphson method is suggested. In this note we revisit this inversion problem and show that it can be rewritten in terms of the Langevin function for which numerical approximations of its inverse are known. The approach is very similar to that of Buchen and Kelly (BK) with the difference that BK only requires call option prices. Then, in continuation of our first paper, we presented another approach which uses call prices only and recovers the same density as BK with a few advantages, notably, numerical stability. This second paper provides a detailed analysis of convergence and, in particular, gives various estimates of how far (in different senses) the iterative algorithm is from the solution. These estimates rely on a constant m > 0. The larger m is the better the estimates will be. A concrete value of m is suggested in the second paper, and this note provides a sharper value. |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1212.4279&r=cmp |
| By: | Villemot, Sébastien |
| Abstract: | State-of-the-art algorithms for solving sovereign debt models with endogenous default rely on value function iterations. These algorithms are consequently very slow and quickly become intractable, even for a state space of dimension as low as three. This paper shows how to adapt the endogenous grid method for sovereign debt models, leading to a dramatic speed gain by a factor comprised between 5 and 10. A second contribution is to quantify and compare the accuracy of the computed solutions by both the value function iterations and the endogenous grid method. |
| Keywords: | sovereign debt; endogenous default; endogenous grid method; solution accuracy |
| JEL: | C63 F34 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:dynare:017&r=cmp |
| By: | Susana Santos, |
| Abstract: | Policy analysis and policy making are parts of the policy decision process for which working tools are needed. A Social Accounting Matrix (SAM) consistent with the national accounts is presented at the level of a country, as a possible working tool intended to support that process. Such a framework will therefore consist of a SAM-based approach. On the one hand, it will involve the presentation of a numerical version of a SAM, constructed from national accounts adapted to the System of National Accounts (SNA). This numerical version will be shown as a device that makes it possible to take a snapshot of the reality under study. On the other hand, it will also involve the presentation of two algebraic versions, with which alternative scenarios will be defined for the measurement of policy impacts. One version will consist of accounting multipliers, and the other version will be a so-called master model. In the latter each cell will be defined with a linear equation or system of equations, whose components will be all the known and quantified transactions of the SNA, using the parameters deduced from the numerical SAM that served as the basis for this model. The national accounts will be adopted as the main source of information. The nominal flows that are representative of that part of a society’s activity that is measured by these accounts will be used to measure the network of linkages and interactions involving institutional sectors, production activities and products, as well as the factors that are involved in the production process. An application will be made of a SAM to the Portuguese case, with a comparison being made of the data obtained from the initial numerical SAM and the numerical versions replicated after running the SAM-based models that are representative of those two algebraic versions. Certain comments will be made about those aspects that are either not measured at all or are poorly measured, or else are not identified, and these will be considered as limitations affecting the work undertaken. Some guidelines will be defined for future research, designed to take the study of the SAM to a deeper level and to improve its use in establishing a suitable framework for explaining the reality of countries and supporting the policy decision process. JEL Classification: E61; E10; D57. |
| Keywords: | Social Accounting Matrix; SAM-based Modelling; Macroeconomic Modelling; Policy Analysis. |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp282012&r=cmp |
| By: | Andrea Taddei (University of Genoa, Italy) |
| Abstract: | The aim of this paper is to simulate a tax shift reform from labor to consumption in Italy and observe the distributional impact of this policy on households. The microsimulation model used is EUROMOD, which is uniquely focused on direct taxes, social contributions and benefits. Through a two steps matching between the Italian income survey (IT-SILC) and the Households Budget Survey (Indagine sui consumi delle famiglie italiane – ISTAT), the model was enriched with data on consumption and it has been possible to simulate also indirect taxes (VAT and excises). Once calculated the baseline, the reform has been simulated by a decrease in social security contributions paid by employees, compensated with a rise in standard VAT in order to obtain Government budget neutrality. The main finding is that the simulated reform increase the regressive of the system without changes in the redistribution strategies or with a more progressive income taxation. To obtain a measure of the change in households wealth, has been used the Welfare Gain index which considered both consumption and income changes. The results are also shown at regional level. |
| Keywords: | direct and indirect taxation, fiscal microsimulation, progressivity, tax reform, redistribution |
| JEL: | C81 D12 D63 H22 H31 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:gea:wpaper:9/2012&r=cmp |
| By: | Lilia Cavallari (Università degli Studi di Roma Tre) |
| Abstract: | This paper studies the business cycle implications of entry costs in a dynamic stochastic general equilibrium model with firm entry and nominal rigidity. Simulations show that my baseline model matches the dynamics observed in the data fairly well. Remarkably, it overcomes the well-known di¢ culties of business cycle models in reproducing the persistence, smoothness and cyclicality of macroeconomic aggregates. I stress that capital entry costs are essential for these results. |
| Keywords: | entry costs, firm entry, business cycle, investment costs. |
| JEL: | E31 E32 E52 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:rcr:wpaper:07_12&r=cmp |