nep-cmp New Economics Papers
on Computational Economics
Issue of 2013‒03‒02
eight papers chosen by
Stan Miles
Thompson Rivers University

  1. Numerical analysis of multilevel Monte Carlo path simulation using the Milstein discretisation By Michael Giles; Kristian Debrabant; Andreas Roessler
  2. Solving Incomplete Markets Models by Derivative Aggregation By Tobias Grasl
  3. Efficiency and Equity Effects of Taxing the Financial Sector: Lessons from a CGE Model for Belgium By O. Chisari; Antonio Estache; Gaëtan Nicodème
  4. Factor Sreening For Simulation With Multiple Responses: Sequential Bifurcation By Shi, W.; Kleijnen, Jack P.C.; Liu, Zhixue
  5. Promoting alternative, environmentally friendly passenger transport technologies: Directed technological change in a bottom-up/top-down CGE model By Veronika Kulmer
  6. External shocks, fiscal policy and income distribution : alternative scenarios for Moldova By Kinnunen, Jouko; Lofgren, Hans; Sulla, Victor; Merotto, Dino
  7. Signal amplification in an agent-based herding model By Adri\'an Carro; Ra\'ul Toral; Maxi San Miguel
  8. A New Zealand Regional Housing Model By Arthur Grimes; Sean Hyland; Andrew Coleman; James Kerr; Alex Collier

  1. By: Michael Giles; Kristian Debrabant; Andreas Roessler
    Abstract: The multilevel Monte Carlo path simulation method introduced by Giles (Operations Research, 56(3):607-617, 2008) exploits strong convergence properties to improve the computational complexity by combining simulations with different levels of resolution. Previous research has analysed its efficiency when using the Euler-Maruyama discretisation, and also demonstrated its improved efficiency using the Milstein discretisation with its improved strong convergence. In this paper we analyse its efficiency for scalar SDEs using the Milstein discretisation, bounding the order of convergence of the variance of the multilevel estimator, and hence determining the computational complexity of the method.
    Date: 2013–02
  2. By: Tobias Grasl (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: This article presents a novel computational approach to solving models with both uninsurable idiosyncratic and aggregate risk that uses projection methods, simulation and perturbation. The approach is shown to be both as efficient and as accurate as existing methods on a model based on Krusell and Smith (1998), for which prior solutions exist. The approach has the advantage of extending straightforwardly, and with reasonable computational cost, to models with a greater range of diversity between agents, which is demonstrated by solving both a model with heterogeneity in discount-rates and a lifecycle model with incomplete markets.
    Keywords: Idiosyncratic Risk, Business Cycles, Numerical Methods
    JEL: C63 E21 E32
    Date: 2013–02
  3. By: O. Chisari; Antonio Estache; Gaëtan Nicodème
    Abstract: This paper assesses the effects of applying VAT or a sales tax on (intermediate or final) sales of the financial sector. It uses a CGE Model calibrated for a small open economy. It highlights the differentiated sectoral and redistributional effects of these taxes and shows the importance of the financial openness of the economy on these results.
    Keywords: taxation; financial sector; VAT; sales tax; modeling; Belgium
    JEL: H20 H25 H30 H87
    Date: 2013–01
  4. By: Shi, W.; Kleijnen, Jack P.C.; Liu, Zhixue (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Factor screening searches for the really important inputs (factors) among the many inputs that are changed in a realistic simulation experiment. Sequential bifurcation (SB) is a sequential method that changes groups of inputs simultaneously. SB is the most efficient and effective method if the following assumptions are satisfied: (i) second-order polynomials are adequate approximations of the input/output functions implied by the simulation model; (ii) the signs of all first-order effects are known; (iii) if two inputs have no important first-order effects, then they have no important second-order effects either (heredity property). This paper examines SB for random simulation with multiple responses (outputs), called multiresponse SB (MSB). This MSB selects groups of inputs such that within a group all inputs have the same sign for a specific type of output, so no cancellation of first-order effects occurs. MSB also applies Wald’s sequential probability ratio test (SPRT) to obtain enough replicates for correctly classifying a group effect or an individual effect as important or unimportant. MSB enables efficient selection of the initial number of replicates in SPRT. The paper also proposes a procedure to validate the three assumptions of MSB. The performance of MSB is examined through extensive Monte Carlo experiments that satisfy all MSB assumptions, and through a case study representing a logistic system in China; the MSB performance is very promising.
    Keywords: simulation;design of experiments;statistical analysis
    JEL: C0 C1 C9 C15 C44
    Date: 2013
  5. By: Veronika Kulmer (Wegener Center for Climate and Global Change, University of Graz, Austria)
    Abstract: This paper evaluates policy options that foster the progress of alternative, environmentally friendly passenger transport technologies in order to reduce greenhouse gas emissions viable technological switch. For the example of Austria, we develop a dynamic computable general equilibrium model which explicitly considers passenger transport technologies comprising "internal combustion engine” (ICE), “plug-in hybrid electric vehicle” (PHEV), “electric vehicle” (EV) and “fuel cell electric vehicle” (FCEV). Regarding technological progress we also incorporate labor augmenting, directed technological change. For policy analysis, we study the effects of (i) a phase out of ICE and subsidy in R&D, (ii) a fuel tax and subsidy in R&D and (iii) an output subsidy on FCEV. We find that in terms of overall emission reduction, in the given time scale from 2005 to 2050, the continuous phase-out of ICE in combination with a subsidy in R&D is the most effective policy measure. The fuel tax in combination with a subsidy in R&D shows the smallest emission reduction. However, in terms of costs, impacts on consumption of private goods are the smallest among all policy instruments. Moreover, domestic output of economic sectors is boosted. Finally, results show, that the competitiveness of FCEV implies a considerable fall in emissions and favors production of several economic sectors, such as electrical machinery and chemical products. However, in order to ensure competitiveness the output subsidy on FCEV is extremely high, impacting private consumption strongly.
    Keywords: technology policy, directed technological change, computable general equilibrium
    JEL: O31 O38 Q55 Q58
    Date: 2013–02
  6. By: Kinnunen, Jouko; Lofgren, Hans; Sulla, Victor; Merotto, Dino
    Abstract: The economy of Moldova, which has one of the lowest levels of gross national income per capita in the World Bank Europe and Central Asia region, is strongly linked to the outside world, especially to the neighboring countries of the European Union and the Commonwealth of Independent States. This paper analyzes a set of scenarios for Moldova up to 2020, defined to shed light on issues related to an alternative future dominated by goods and services exports as opposed to today's reliance on worker remittances. The analysis is based on a Moldovan version of MAMS (Maquette for Millennium Development Goal Simulations), a CGE (Computable General Equilibrium) model for country strategy analysis. In sum, the impact of increased export demand and productivity growth is more positive when these shocks are directed to manufacturing, a sector more heavily linked to international trade, compared with agriculture. Increased productivity in transport and communications generates faster growth with widely diffused benefits, reaching households in a relatively equitable manner compared with foreign trade-induced growth. A comparison between adverse shocks in two areas, higher energy import prices, and lower remittances, designed to have similar effects on gross domestic product, suggests that a remittance shock leads to less of a poverty increase, related to the fact that remittance-receiving households are not highly vulnerable; among sectors, agriculture is most vulnerable due to heavy energy reliance. Finally, well-targeted transfer schemes may offer an effective tool for diffusing the benefits of economic growth to the whole population, perhaps also contributing to more general acceptance of structural change.
    Keywords: Economic Theory&Research,Debt Markets,Emerging Markets,Labor Policies,Currencies and Exchange Rates
    Date: 2013–02–01
  7. By: Adri\'an Carro; Ra\'ul Toral; Maxi San Miguel
    Abstract: A growing part of the behavioral finance literature has addressed some of the stylized facts of financial time series as macroscopic patterns emerging from herding interactions among groups of agents with heterogeneous trading strategies and a limited rationality. We extend a stochastic herding formalism introduced for the modeling of decision making among financial agents, in order to take also into account an external influence. In particular, we study the amplification of an external signal imposed upon the agents by a mechanism of resonance. This signal can be interpreted as an advertising or a public perception in favor or against one of the two possible trading behaviors, thus periodically breaking the symmetry of the system and acting as a continuously varying exogenous shock. The conditions for the ensemble of agents to more accurately follow the periodicity of the signal are studied, finding a maximum in the response of the system for a given range of values of both the noise and the frequency of the input signal.
    Date: 2013–02
  8. By: Arthur Grimes (Motu Economic and Public Policy Research); Sean Hyland (Motu Economic and Public Policy Research); Andrew Coleman (New Zealand Treasury); James Kerr (Ministry of Business, Innovation and Employment); Alex Collier (Ministry of Business, Innovation and Employment)
    Abstract: The New Zealand Regional Housing Model (NZRHM) includes estimated equations for four key housing market variables: house prices, housing supply (new dwelling consents), residential vacant land (lot) prices, and average rents. Long run (cointegration) relationships and short run (error correction) relationships are estimated for each of these variables across 72 TLAs within New Zealand. The model is designed so that it can be used for short to medium term forecasting. It is also useful for simulating the effects of shocks to the housing market. The paper presents simulations of the impacts of shocks to exogenous variables (population, credit restrictions, construction costs and farm prices) as well as shocks to policy variables (developer contributions, accommodation supplement, and land availability). We also simulate the consequences of the Christchurch earthquakes for Canterbury housing outcomes. The over-arching conclusion across all simulations is that housing markets are very slow to adjust to disequilibria, such that exogenous shocks have very long lasting effects on prices and the housing stock.
    Keywords: house prices, housing supply, lot prices, rents, housing model
    JEL: R21 R31
    Date: 2013–02

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