New Economics Papers
on Computational Economics
Issue of 2014‒01‒10
eight papers chosen by

  1. Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework By Christoph Böhringer; Thomas F. Rutherford; Marco Springmann
  2. Contribution to the economic impact assessment of policy options to regulate animal cloning for food production with an economic simulation model By Koen Dillen; Emanuele Ferrari; Pascal Tillie; George Philippidis; Sophie Helaine
  3. Challenges in Soft-Linking: The Case of EMEC and TIMES-Sweden By Riekkola, Anna Krook; Berg, Charlotte; Ahlgren, Erik O.; Söderholm, Patrik
  4. Reform of Australian Urban Transport: A CGE-Microsimulation Analysis of the Effects on Income Distribution By George Verikios; Xiao-guang Zhang
  5. "Intensive Margins, Extensive Margins, and the Spousal Allowances in the Japanese System of Personal Income Taxes: A Discrete Choice Analysis" By Shun-ichiro Bessho; Masayoshi Hayashi
  6. Inside PESSOA - A Detailed Description of the Model By Vanda Almeida; Gabriela Lopes de Castro; Ricardo Mourinho Félix; Paulo Júlio; José R. Maria
  7. The structure of a machine-built forecasting system By Jiaqi Chen; Michael L. Tindall
  8. Exact Simulation of Non-stationary Reflected Brownian Motion By Mohammad Mousavi; Peter W. Glynn

  1. By: Christoph Böhringer (University of Oldenburg - Economic Policy & ZenTra); Thomas F. Rutherford (University of Wisconsin-Madison - Agricultural & Applied Economics); Marco Springmann (University of Oldenburg - Economic Policy)
    Abstract: The Clean Development Mechanism (CDM) established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissions-reduction projects in developing non-Annex I countries. We present a novel CDM modelling framework which can be used in computable general equilibrium (CGE) models to quantify the sector-specific and macroeconomic impacts of CDM investments. Compared to conventional approaches that mimic the CDM as sectoral emissions trading, our framework adopts a microeconomically consistent representation of the CDM incentive structure and its investment characteristics. In our empirical application we show that incentive compatibility implies that the sectors implementing CDM projects do not suffer, and that overall cost savings from the CDM tend to be lower than suggested by conventional modelling approaches.
    Keywords: Clean Development Mechanism, Computable General Equilibrium Modelling
    JEL: C68 Q58
    Date: 2013–12
  2. By: Koen Dillen (European Commission – JRC - IPTS); Emanuele Ferrari (European Commission – JRC - IPTS); Pascal Tillie (European Commission – JRC - IPTS); George Philippidis (European Commission – JRC - IPTS); Sophie Helaine (European Commission – JRC - IPTS)
    Abstract: The EU is currently evaluating different policy options towards the use of cloning or products derived from cloned animals in the food chain. This study presents a first attempt to quantify the likely effects of different policy scenarios on international trade and EU domestic production. In the context of the Impact Asessment process the JRC was requested to simulate via a modelling study the economic impact of selected policy options. Based on a literature review and the specific constraints for this study, the choice was made to perform the analysis through the use of a computable general equilibrium model and focus on the dairy and beef sector. The different model scenarios are constructed based on combinations of the discussed policy options such as a ban or traceability and labelling requirements with the productivity increase associated with cloning. The results show that only the situation where trade with countries using the technique of cloning is suspended has an effect on competitiveness. This suspension could be due to express prohibitions or a de facto decision by exporters when traceability and labelling costs increase. Under this scenario imports drop significantly which is followed by a slight increase in domestic production and prices, especially for beef and cattle.
    Keywords: Cloning, CGE, European policy, international trade, competitiveness
    JEL: F11 F13 Q16 Q17 Q18
    Date: 2013–12
  3. By: Riekkola, Anna Krook (Luleå University of Technology); Berg, Charlotte (National Institute of Economic Research); Ahlgren, Erik O. (Chalmers University of Technology); Söderholm, Patrik (Luleå University of Technology)
    Abstract: The aim of this study is to develop a method for how to soft-link a Computable General Equilibrium (CGE) model with a energy system model. The central research question is how the interaction between modellers and models can, both qualitatively and quantitatively, enable and facilitate a transparent energy and climate policy decision-making process at the national level. The paper describes this development in detail, and presents and discusses the results of the soft-linking methodology applied to a climate scenario. Important similarities and differences between two Swedish models, i.e. EMEC (a CGE model) and TIMES-Sweden (an energy system model), are identified. These findings are used to develop a robust and transparent method to translate simulation results between the two models, resulting in intermediate ‘translation models’ between EMEC and TIMES-Sweden. EMEC provides demand input to TIMES, while TIMES provides feedback on the energy efficiency parameters, the energy mix, and the prices of electricity and heat. These ‘translations’ can also be used stand-alone to feed into other energy system models. The presented soft-linking process demonstrates the importance of linking an energy system model with a macroeconomic model when studying energy and climate policy. With the same exogenous parameters, the soft-linking between the models results in a new picture of the economy and the energy system in 2035 compared with the corresponding model results in the absence of soft-linking. The study also leads to a better understanding of how the models can interact while preserving the respective models' strengths, to give an improved picture of both the flows in the economy and the impact of energy policy instruments.
    Keywords: Soft-linking; Computable General equilibrium; TIMES/MARKAL; Climate policy; Energy policy
    JEL: C68 D58 Q43
    Date: 2013–12–20
  4. By: George Verikios; Xiao-guang Zhang
    Abstract: Australian urban transport industries experienced substantial reform during the 1990s leading to significant structural change. Urban transport is typically an important expenditure item for households and structural change in these services may affect households differently depending on their position in the distribution of income and expenditure. We estimate the effects on household income groups of this structural change by applying a computable general equilibrium model incorporating microsimulation behaviour with top-down and bottom-up links. We compare estimates based on a pure microsimulation approach, a top-down approach and a hybrid top-down/bottom-up approach. We estimate small reductions in real income and small reductions in inequality; this pattern is largely replicated across regions. Our results are insensitive to the inclusion of bottom-up links; in contrast, applying a pure microsimulation approach gives accurate results at the aggregate level but underestimates the variation in effects across deciles and regions.
    Keywords: computable general equilibrium, income distribution, microeconomic reform, microsimulation, urban transport
    JEL: C68 C69 D31 L92
    Date: 2013–12
  5. By: Shun-ichiro Bessho (Faculty of Economics, Keio University,); Masayoshi Hayashi (Faculty of Economics, The University of Tokyo)
    Abstract:    This study explores the effects of the spousal allowances in the Japanese system of personal income taxes, taking advantage of the micro-simulation method based on the discrete choice model of labor supply. Our simulations show that the complete abolishment of the spousal allowances would increase the female labor supply by 1.6% for all wives, and by .1% for wives that are supposed to be under a large influence of the allowances. We also examine the reform in the allowances which leads to a decrease in the female labor supply. We argue that these results are due to our explicit consideration of the fixed cost of labor market participations, which has been ignored in the previous Japanese studies.
    Date: 2013–12
  6. By: Vanda Almeida; Gabriela Lopes de Castro; Ricardo Mourinho Félix; Paulo Júlio; José R. Maria
    Abstract: This article presents a detailed description of PESSOA - Portuguese Economy Structural Small Open Analytical model. PESSOA is a dynamic general equilibrium model that can be applied to any small economy integrated in a monetary union. The main theoretical reference behind its structure is Kumhof, Muir, Mursula, and Laxton (2010). The model features non-Ricardian characteristics, a multi-sectoral production structure, imperfect market competition, and a number of nominal, real, and financial rigidities. PESSOA has been calibrated to match Portuguese and euro area data and used to illustrate a number of key macroeconomic issues, ranging from the effects of structural reforms to alternative fiscal policy options.
    JEL: E62 F41 H62
    Date: 2013
  7. By: Jiaqi Chen; Michael L. Tindall
    Abstract: This paper describes the structure of a rule-based econometric forecasting system designed to produce multi-equation econometric models. The paper describes the functioning of a working system which builds the econometric forecasting equation for each series submitted and produces forecasts of the series. The system employs information criteria and cross validation in the equation building process, and it uses Bayesian model averaging to combine forecasts of individual series. The system outperforms standard benchmarks for a variety of national economic datasets.
    Keywords: Econometrics
    Date: 2013
  8. By: Mohammad Mousavi; Peter W. Glynn
    Abstract: This paper develops the first method for the exact simulation of reflected Brownian motion (RBM) with non-stationary drift and infinitesimal variance. The running time of generating exact samples of non-stationary RBM at any time $t$ is uniformly bounded by $\mathcal{O}(1/\bar\gamma^2)$ where $\bar\gamma$ is the average drift of the process. The method can be used as a guide for planning simulations of complex queueing systems with non-stationary arrival rates and/or service time.
    Date: 2013–12

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