nep-cmp New Economics Papers
on Computational Economics
Issue of 2013‒11‒16
fifteen papers chosen by
Stan Miles
Thompson Rivers University

  1. Poverty Impacts of Agricultural Policy Adjustments in an Opening Economy: the Case of Colombia By Ricardo Arguello; Daniel Valderrama G.; Sandra Acero W.
  2. Simulation-Optimization via Kriging and Bootstrapping: A Survey (Revision of CentER DP 2011-064) By Kleijnen, Jack P.C.
  3. Public infrastructure and economic growth in Pakistan: a dynamic CGE-microsimulation analysis By Vaqar Ahmed; Ahsan Abbas; Saira Ahmed
  4. Turning green: Agent-based modeling of the adoption of dynamic electricity tariffs By Anna Kowalska-Pyzalska; Katarzyna Maciejowska; Katarzyna Sznajd-Weron; Karol Suszczynski; Rafal Weron
  5. Does SIC need a heart pacemaker? By Robert Oleschak; Thomas Nellen
  6. Resource booms, growth and poverty in Laos : What can we learn from other countries and policy simulations? By Phouphet Kyophilavong; Chanthachone Senesouphap; Somnack Yawdhacksa
  7. Analysis of Fossil Fuel Subsidies in Kazakhstan By Nugumanova, Lyazzat
  8. Short-term emissions reductions in the electricity sector By Solier, Boris
  9. Impacts of Liberalization on Agriculture and Trade: A Case Study of Uzbekistan By Sattarov, Doniyor; Schmitz, P. Michael; Mal, Puran
  10. A Microsimulation on Tax Reforms in LAC Countries: A New Approach Based on Full Expenditures. By Carla Canelas; François Gardes; Silvia Salazar
  11. "A Simple Model of Income, Aggregate Demand, and the Process of Credit Creation by Private Banks" By Giovanni Bernardo; Emanuele Campiglio
  12. Modeling Health in a CGE Framework: A Case Study of India By Nitesh Sahay; John Cockburn; Mitu Pathak
  13. Poverty and social impact analysis of increased natural gas prices and selected social guarantees in Ukraine By Oleksandra Betliy; Veronika Movchan; Mykola Pugachov
  14. The impact of FDI on the production networks between China and East Asia and the role of the U.S. and ROW as final markets By Zhou, Jing; Latorre, María C.
  15. A Traffic Jam Theory of Recessions By Jennifer La'O

  1. By: Ricardo Arguello; Daniel Valderrama G.; Sandra Acero W.
    Abstract: We aim to assess the sectoral and poverty impacts of changes in agricultural policy in Colombia on the rural sector. For this we use an agriculture specialized static CGE model, together with a microsimulation model that allows employment to shift between sectors. The results indicate that the sectoral impact of the implemented program tends to be small and varies considerably across crops. Also, while it does reduce poverty, these impacts are small and tend to be concentrated in rural households toward the middle of the household income distribution.
    Keywords: Agricultural policy, Rural poverty, Computable General Equilibrium, Microsimulation, Colombia
    Date: 2012
  2. By: Kleijnen, Jack P.C. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This article surveys optimization of simulated systems. The simulation may be either deterministic or random. The survey reflects the authors extensive experience with simulation-optimization through Kriging (or Gaussian process) metamodels. The analysis of these metamodels may use parametric bootstrapping for deterministic simulation or distribution-free bootstrapping (or resampling) for random simulation. The survey covers: (1) Simulation-optimization through "efficient global optimization" (EGO) using "expected improvement" (EI); this EI uses the Kriging predictor variance, which can be estimated through parametric bootstrapping accounting for estimation of the Kriging parameters. (2) Optimization with constraints for multiple random simulation outputs and deterministic inputs through mathematical programming applied to Kriging metamodels validated through distribution-free bootstrapping. (3) Taguchian robust optimization for uncertain environments, using mathematical programming applied to Kriging metamodels and distribution- free bootstrapping to estimate the variability of the Kriging metamodels and the resulting robust solution. (4) Bootstrapping for improving convexity or preserving monotonicity of the Kriging metamodel.
    Keywords: simulation;optimization;stochastic process;;non-linear programming;risk
    JEL: C0 C1 C9
    Date: 2013
  3. By: Vaqar Ahmed; Ahsan Abbas; Saira Ahmed
    Abstract: The role of infrastructure in economic growth and welfare has been studied extensively across the literature over the past three decades. We use a dynamic CGE model linked to a microsimulation model to estimate the macro-micro impact of public infrastructure investment. Two approaches to public investment are considered in our simulations. In the first, production taxes finance the additional public infrastructure investment and in the second, foreign borrowing provides resources. Our results reveal that public infrastructure investments have the same direction of impact whether funded by taxation or international borrowing, particularly when looking at macroeconomic gains and poverty reduction in the long run. However, in the very short run, tax financing puts a strain on output in the industrial sector and thus reduces economic growth in the short run. The financing from international borrowing has a Dutch disease-like impact in the short run, as indicated by a decline in exports.
    Keywords: Infrastructure, Economic Growth, Poverty, Pakistan, Computable General Equilibrium
    JEL: C68 E22 H54 I38
    Date: 2013
  4. By: Anna Kowalska-Pyzalska; Katarzyna Maciejowska; Katarzyna Sznajd-Weron; Karol Suszczynski; Rafal Weron
    Abstract: Using an agent-based modeling approach we study the temporal dynamics of consumer opinions regarding switching to dynamic electricity tariffs and the actual decisions to switch. We assume that the decision to switch is based on the unanimity of $\tau$ past opinions. The resulting model explains why there is such a big discrepancy between consumer opinions, as measured by market surveys, and the actual participation in pilot programs and the adoption of dynamic tariffs. We argue that due to the high indifference level in today's retail electricity markets, customer opinions are very unstable and change frequently. The conducted simulation study shows that reducing the indifference level can result in narrowing the intention-behavior gap. A similar effect can be achieved by decreasing the decision time that a consumer takes to make a decision.
    Keywords: Dynamic pricing; Demand response; Consumer decisions; Intention-behavior gap; Innovation diffusion; Agent-based model
    JEL: C63 O33 Q48 Q55
    Date: 2013–11–04
  5. By: Robert Oleschak; Thomas Nellen
    Abstract: Real-time gross settlement (RTGS) systems effect final settlement of payments continuously and on an individual basis. This generates a trade-off between liquidity needs and settlement delay. Against the background of reconstruction discussions, the paper analyses whether more advanced algorithms reduce liquidity needs and settlement delay if applied to the Swiss Interbank Clearing (SIC) system. Simulations run with the BoF-PSS2 simulator show that expected reductions in liquidity needs and settlement delay are modest and should carefully be evaluated against costs. More advanced settlement algorithms improve settlement efficiency only if payment release behaviour is highly aligned.
    Keywords: payment system, simulation, payment splitting, liquidity-saving mechanisms
    JEL: C63 E42 G18
    Date: 2013
  6. By: Phouphet Kyophilavong; Chanthachone Senesouphap; Somnack Yawdhacksa
    Abstract: Laos is a small, open, least-developed country (LDC) in Southeast Asia. However, it is a resource-rich economy with over 570 identified mineral deposits. As a result, Laos has experienced massive inflows of foreign direct investment (FDI) in the mining and hydroelectricity sectors since 2003. Despite the likelihood that resource booms will carry both positive and negative impacts on the Lao economy, this issue has been underresearched in Laos. This study thus lays out a framework to quantify the impacts of resource booms on the macro economy and on poverty in Laos using a computable general equilibrium (CGE) model. We find that the higher capital stock and productivity led to increased value added, production, exports and investment in the mining sector, resulting in higher real GDP, exports and investment. Unfortunately, the associated Dutch disease effects (particularly real exchange rate appreciation) negatively impact real production and value added in agriculture, industry and government services.
    Keywords: Resource boom, CGE model, Dutch disease, Laos
    JEL: D58 Q33
    Date: 2013
  7. By: Nugumanova, Lyazzat
    Abstract: During the last decades the topic of fossil fuel subsidies has been gaining importance in the policy discussion. International Energy Agency (IEA) (2011) estimates that the total global fossil fuel subsidies in 2010 amounted to $409 billion. Kazakhstan is energy-rich country with significantly high subsidies on fossil fuels. Fossil fuel subsidies are a distortion which causes inefficient use of energy and natural resources, high CO2 emissions, distort the energy markets, put pressure on the state budget, and hinder investments into energy sector and renewable energy and thus long-term sustainable development in Kazakhstan. Removing fossil fuel subsidies could be in the long-term beneficial for Kazakhstan. The main research question is to analyze macroeconomic effects of removing current distortions in the energy market using the computable general equilibrium model (CGE), GTAP. The specific objectives are to understand the issue and the extent of fossil fuel subsidies in Kazakhstan, analyze implications of these subsidies, and provide general policy suggestions on this topic. This paper first presents main data on fossil fuel subsidies, energy and environment in Kazakhstan, literature review, methodological approach suitable for this research and expected results.
    Keywords: fossil fuel subsidies, Kazakhstan, computable general equilibrium model (CGE), GTAP, Environmental Economics and Policy, International Development, International Relations/Trade, Research Methods/ Statistical Methods, R, Q, O,
    Date: 2013–10–01
  8. By: Solier, Boris
    Keywords: Supply and demand; Zephyr- Switch simulation model; electricity; EU ETS; European Union CO2 emissions trading scheme;
    JEL: L94 Q56 Q52 Q41
    Date: 2013
  9. By: Sattarov, Doniyor; Schmitz, P. Michael; Mal, Puran
    Abstract: The agricultural sector of Uzbekistan is still characterized by unsustainable production patterns and the agricultural institutions of the country are controlled to a large extent through government intervention. The Government takes the decision to grow cotton and wheat and fix the output prices. The decision about the production quotas for cotton and wheat leads to a restricted area and water availability for growing other crops. The country is affected by a locally occurring climate change as well as regional climate change threatens to aggravate existing water use conflicts. The current and expected climatic conditions are showing the additional irrigation applications for a sustainable and fruitful agricultural production. The partial implementation of reforms such as privatization and liberalization of agricultural markets affect the development of agriculture and agricultural trade in Uzbekistan. This paper highlights the major effects of market and price liberalization on agricultural trade using the partial equilibrium model AGRISIM which is based on the "Static World Policy Simulation Model" (SWOPSIM)of the U.S. Department of Agriculture (USDA).With the help of the model, changes in general economic conditions and policy intervention in agricultural markets and foreign trade are simulated. The study suggests that the issues of sustainable agriculture development and food security in Uzbekistan can be achieved through, liberalization of agricultural markets and trade specially wheat and cotton.
    Keywords: Uzbekistan, agricultural sector, agriculture trade, liberalization, AGRISIM Model., Agricultural and Food Policy, International Development, Research Methods/ Statistical Methods, R, Q, O,
    Date: 2013–10–01
  10. By: Carla Canelas (Centre d'Economie de la Sorbonne); François Gardes (Centre d'Economie de la Sorbonne); Silvia Salazar (Centre d'Economie de la Sorbonne)
    Abstract: In this article, we propose a new method to estimate price effects on micro cross-sectional data using full prices that take into account household domestic production. We use behavioral microsimulations by subpopulations to analyze the redistributive impact of changes on Value Added Tax (VAT) rates in Ecuador and Guatemala. Utility analysis is used to evaluate the consequences on households welfare caused by these tax reforms. The proposed model solves the crucial problem of price data availability in developing countries. The estimates of the full price elasticities highlight the importance of the substitution between time and monetary expenditures within the households domestic production function and show that traditional approaches only tell half of the story. In general, the utility estimates seem to be consistent as they have the expected sign and follow the same pattern of changes in consumption.
    Keywords: Consumer demand, full prices, microsimulation, taxes, time-use, welfare.
    JEL: D04 D11 D12 D13
    Date: 2013–07
  11. By: Giovanni Bernardo; Emanuele Campiglio
    Abstract: This paper presents a small macroeconomic model describing the main mechanisms of the process of credit creation by the private banking system. The model is composed of a core unit--where the dynamics of income, credit, and aggregate demand are determined--and a set of sectoral accounts that ensure its stock-flow consistency. In order to grasp the role of credit and banks in the functioning of the economic system, we make an explicit distinction between planned and realized variables, thanks to which, while maintaining the ex-post accounting consistency, we are able to introduce an ex-ante wedge between current aggregate income and planned expenditure. Private banks are the only economic agents capable of filling this gap through the creation of new credit. Through the use of numerical simulation, we discuss the link between credit creation and the expansion of economic activity, also contributing to a recent academic debate on the relation between income, debt, and aggregate demand.
    Keywords: Banking System; Credit Creation; Growth; Aggregate Demand; Macroeconomic Modeling
    JEL: E20 E51 G21 O42
    Date: 2013–10
  12. By: Nitesh Sahay; John Cockburn; Mitu Pathak
    Abstract: Health is considered to be an extremely important component of human welfare. By the time India gained independence in 1947, achievement of good health had become an important national goal in its own right. Nevertheless, a vast public health infrastructure in India comprising of 145,000 Sub-centres, 23,000 Public Health Centres (PHCs) and 3222 Community Health Centres (CHCs) is estimated to be able to cater to only 20% of the Indian population. There have been numerous attempts to understand and analyze the causes underlying the failures of the health policies and thereby to provide meaningful solutions. While most of the earlier attempts to understand health look at the role of public and private institutions in the provision of health care, the focus of this paper is to identify the role that households play in determining their health status and the macroeconomic effects this decision can generate. The paper uses a CGE framework to simulate the effects of complete tariff liberalization in the presence / partial withdrawal / complete absence of health subsidy. Among major conclusions, this paper finds that complete subsidization of health reduces overall disparity by favoring rural households over urban. Withdrawal of health subsidy leads to domestic re-allocation of poverty pushing down the wage rates in agricultural sector, the main stay of rural households.
    Keywords: Health, CGE, Health capital, Health Models, Public Health, Household Production Function
    JEL: D58 D13 C68 I12 I15 I18
    Date: 2013
  13. By: Oleksandra Betliy; Veronika Movchan; Mykola Pugachov
    Abstract: To date, prices of gas and other energy used by households in Ukraine have been generously subsidized by the Government. However, suppressed energy prices lead to excessive use of gas and an inefficient level of investment into energy savings. In addition, Ukraine’s dependence on imported gas contributes to trade imbalances and growing pressure on the devaluation of the national currency. Thus, the issue of raising gas prices remains critical for the population of Ukraine. In particular, this step was also envisaged in an ambitious reform agenda announced in mid-2010 aimed at restoring stable and high economic growth. However, this policy may have an unprecedented impact on the welfare of population. This paper presents the main findings from the simulation of gas price shocks, provides an overview of social support programs in Ukraine and analyses their efficiency. Based on the analyses, the paper draws two major conclusions. First, increases in gas prices result in welfare losses in all household categories, with a more profound impact on urban households. Second, the current social welfare programs are not very efficient in targeting the poorest households. Reform of the social welfare system is thus required to ensure a safety net for poor households in times of gas price hikes. In order to assist national decisionmakers in solving these issues the paper presents general policy recommendations.
    Keywords: gas price shock simulation, welfare programs, social support programs
    JEL: I38
    Date: 2013
  14. By: Zhou, Jing; Latorre, María C.
    Abstract: This paper uses a 3 factor – 4 region – 15 sector computable general equilibrium model to study the impact of FDI accruing to China. We focus on the sectors of Electronics, Machinery and Textiles which account for 55.4% and 40% of Chinese overall exports and imports, respectively. Our data seem to confirm the existing empirical knowledge on the production networks between China and East Asia, and the role that the U.S. and ROW play as final markets for Chinese exports. Based on these differentiated geographical roles and on the contrasting production technologies of the three sectors, we offer an in-depth analysis of the effect of FDI inflows on production, prices and bilateral trade across China, East Asia, the U.S. and ROW. The magnitude of FDI inflows brings about proportional impacts on the increase in production and the fall in prices across the three sectors considered. However, the subsequent adjustment in bilateral trade differs. On the one hand, FDI leads to an increase of Chinese exports of Electronics and Machinery, crowding out production and exports in the rest of regions. On the other hand, the increase in FDI in Textiles still brings about increase in production which does not result in higher exports. The private consumption orientation of Textiles explains its contrasting trade pattern with respect to Electronics and Machinery. The fall in Chinese exports of Textiles in China underlies the increase on exports of Textiles across the rest of regions. However, world trade flows in Textiles are of smaller volume than the one in Electronics and Machinery. Therefore, the increase in Textiles of exports of the rest of regions does not compensate their big losses of exports in Machinery and Electronics.
    Keywords: Computable General Equilibirium; Intermediates; Multinationals; Triangular trade pattern; Production fragmentation; Value Chains
    JEL: C68 F14 F15 F17
    Date: 2013–11–11
  15. By: Jennifer La'O (University of Chicago)
    Abstract: I construct a dynamic economy in which agents are interconnected: the output produced by one agent is the consumption good of another. I show that this economy can generate recessions which resemble traffic jams. At the micro level, each individual agent waits for his own income to increase before he increases his spending. However, his spending behavior affects the income of another agent. Thus, the spending behavior of agents during recessions resembles the stop-and-go behavior of vehicles during traffic jams. Furthermore, these traffic jam recessions are not caused by large aggregate shocks. Instead, in certain parts of the parameter space, a small pertubation or individual shock is amplified as its impact cascades from one agent to another. These dynamics eventually result in a stable recessionary equilibrium in which aggregate output, consumption, and employment remain low for many periods. Thus, much like in traffic james, agents cannot identify any large exogenous shock that caused the recession. Finally, I provide conditions under which these traffic jam recessions are most likely to occur.
    Date: 2013

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