nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒06‒22
ten papers chosen by
Stan Miles
Thompson Rivers University

  1. Dynamics and Welfare in Recombinant Growth Models with Intellectual Property Rights: a Computational Method By Privileggi, Fabio; Marsiglio, Simone
  2. A Microsimulation model of the Slovak Tax-Benefit System By Zuzana Siebertova; Norbert Svarda; Jana Valachyova
  3. InfsocSol3: An updated MATLAB® package for approximating the solution to a continuous-time infinite horizon stochastic optimal control problem By Krawczyk, Jacek B; Pharo, Alastair S
  4. Price dynamics and financialization effects in corn futures markets with heterogeneous traders By Grosche, Stephanie; Heckelei, Thomas
  5. NIRA-GUI: A matlab application which solves for couple-constraint nash equibria from a symbolic specification By Krawczyk, Jacek B; Townsend, Wilbur
  6. The finite sample performance of estimators for mediation analysis under sequential conditional independence By Huber, Martin; Mellace, Giovanni; Lechner, Michael
  7. Database Structure for a Multi Stage Stochastic Optimization Based Decision Support System for Asset – Liability Management of a Life Insurance Company By Rao, Harish Venkatesh; Dutta, Goutam; Basu, Sankarshan
  8. Catching up with the Joneses and Borrowing Constraints: An Agent-based Analysis of Household Debt By Nadja König; Ingrid Größl
  9. Robust Portfolio Protection: A Scenarios-Based Approach By Selim Mankaï; Khaled Guesmi
  10. Transparency and deliberation within the FOMC: A computational linguistics approach By Stephen Eliot Hansen; Michael McMahon; Andrea Prat

  1. By: Privileggi, Fabio; Marsiglio, Simone (University of Turin)
    Abstract: We consider the extended continuous time endogenous recombinant growth model with a basic IPRs system introduced by Marchese et al. (2014). In order to analyze the effect on social welfare of different IPRs policy regimes, we must carefully study the transition dynamics associated to different values of the IPRs policy parameter. To this aim, we exploit the computational method recently developed by Privileggi (2011, 2013), based on Projection methods, Gauss-Chebyshev and Gauss-Legendre quadrature, along with standard Runge-Kutta type algorithms, to approximate such transitional dynamic paths and perform Skiba-point analysis. Our simulations show that softer IPRs policy regimes generate higher welfare levels.
    Date: 2014–06
  2. By: Zuzana Siebertova (Council for Budget Responsibility); Norbert Svarda (Council for Budget Responsibility); Jana Valachyova (Council for Budget Responsibility)
    Abstract: This paper sets out in detail a microsimulation model of the Slovak tax and transfer system that builds on the existing EUROMOD platform. The objective is to give an overview of the development process, and to discuss differences relative to EUROMOD. In a validation exercise, we demonstrate that refinements to the current version of the EUROMOD can improve the match between simulated output, underlying data and official statistics. It is concluded that the model is a valid tool to conduct tax and benefit simulation exercises in the context of Slovakia.
    Keywords: microsimulation, EUROMOD, tax and benefit policy,Slovakia
    JEL: C81 I38 H24
    Date: 2014–06
  3. By: Krawczyk, Jacek B; Pharo, Alastair S
    Abstract: This paper describes a suite of MATLAB® routines devised to provide an approximately optimal solution to an infinite-horizon stochastic optimal control problem. The suite is an updated version of that described in [1] and [2]. Its routines implement a policy improvement algorithm to optimise a Markov decision chain approximating the original control problem, as described in [3].
    Keywords: Computational economics,, Approximating Markov decision chains, MATLAB®,
    Date: 2014
  4. By: Grosche, Stephanie; Heckelei, Thomas
    Abstract: Presumed portfolio benefits of commodities and the availability of index fund-type investment products increase attractiveness of commodity markets for financial traders. But resulting “index trading” strategies are suspected to inflate commodity prices above their fundamental value. We use a Heterogeneous Agent Model for the corn futures market, which can depict price dynamics from the interaction of fundamentalist commercial traders and chartist speculators, and estimate its parameters with the Method of Simulated Moments. In a scenario-based approach, we introduce index funds and simulate price effects from their inclusion in financial portfolio strategies. Results show that the additional long-only trading volume on the market does not inflate price levels but increases return volatility.
    Keywords: Heterogeneous agents, Agent-based modeling, Commodity index treading, Financialization of commodity markets, Agricultural and Food Policy, Agricultural Finance, Financial Economics, Research Methods/ Statistical Methods, D84, G15, G17, Q02,
    Date: 2014–06–07
  5. By: Krawczyk, Jacek B; Townsend, Wilbur
    Abstract: A powerful method for computing Nash equilibria in constrained, multi-player games is created when the relaxation algorithm and the Nikaido-Isoda function are used within a MATLAB application. This paper describes that application, which is able to solve static and open-loop dynamic games specifed symbolically.
    Keywords: Nikaido-Isoda function, Coupled constraints., MATLAB,
    Date: 2014
  6. By: Huber, Martin; Mellace, Giovanni; Lechner, Michael
    Abstract: Using a comprehensive simulation study based on empirical data, this paper investigates the finite sample properties of different classes of parametric and semi-parametric estimators of (natural or pure) direct and indirect causal effects used in mediation analysis under sequential conditional independence assumptions. The estimators are based on regression, inverse probability weighting, and combinations thereof. Our simulation design uses a large population of Swiss jobseekers and considers variations of several features of the data generating process and the implementation of the estimators that are of practical relevance. We find that no estimator performs uniformly best (in terms of root mean squared error) in all simulations. Overall, so-called ‘g-computation’ dominates. However, differences between estimators are often (but not always) minor in the various setups and the relative performance of the methods often (but not always) varies with the features of the data generating process.
    Keywords: Causal mechanisms, direct effects, indirect effects, simulation, empirical Monte Carlo Study, causal channels, mediation analysis, causal pathways
    JEL: C21
    Date: 2014–06
  7. By: Rao, Harish Venkatesh; Dutta, Goutam; Basu, Sankarshan
    Abstract: We introduce a stochastic optimization based decision support system (DSS) for asset-liability management of a life insurance firm using a multi-stage, stochastic optimization model. The DSS is based on a multi-stage stochastic linear program (SLP) with recourse for strategic planning. The model can be used with little or no knowledge of management sciences. The model maximizes the expected value of total reserve (policy holders’ reserve and shareholders’ reserve) at the end of the time period of planning. We discuss the issues related to database design structure, DSS interface design, database updating procedure, and solution reporting.
  8. By: Nadja König (Universität Hamburg (University of Hamburg)); Ingrid Größl (Universität Hamburg (University of Hamburg))
    Abstract: We study an Agent-based model of household-bank relationships where households borrow for the purpose of consumption. Desired consumption is driven by households disposable income as well as a social norm of consumption. If households care about their relative position in the economy (i.e. want to catch up with the Joneses), they are willing to take a loan. We conduct several computational experiments, where the absence of the social consumption norm (Joneses effect) functions as control treatment. Varying the strength of the social orientation and prevailing credit constraints, we find that the time path of macroeconomic time series is largely affected by the Joneses effect, while credit constraints determine their volatility. More precisely, we find that a strong Joneses effect has severe consequences for GDP growth and that borrowing constraints can reduce macroeconomic volatility. Since by assumption high-income and low-income households react equally sensitive to the Joneses effect, income distribution is the decisive variable for households social development. That said, access to credit exposes already poor households to find themselves caught in a poverty trap.
    Keywords: D53, E21
    Date: 2014–06
  9. By: Selim Mankaï; Khaled Guesmi
    Abstract: This paper constructs a robust optimization framework of the uncertain worst-case return. The model defines an adjustable discrete uncertainty set which controls the conservatism of the optimal asset allocation. Without prior assumptions on the data generating process, the model also develops an a priori probabilistic guarantee of the robust solution. Unlike previous measures that depend solely on the uncertainty model, the new measure is also sensitive to asset allocation and investment horizon. We provide an application of international stock indexes portfolio protection during the 2008 financial crisis. Computational experiments and ex-post analysis provide evidence for the effectiveness of our model.
    Keywords: Portfolio protection, Robust optimization, Multivariate tail dependence, Nonparametric predictive inference.
    JEL: C14 D81 G11 G15
    Date: 2014
  10. By: Stephen Eliot Hansen; Michael McMahon; Andrea Prat
    Abstract: How does transparency, a key feature of central bank design, affect the deliberation of monetary policymakers? We exploit a natural experiment in the Federal Open Market Committee in 1993 together with computational linguistic models (particularly Latent Dirichlet Allocation) to measure the effect of increased transparency on debate. Commentators have hypothesized both a beneficial discipline effect and a detrimental conformity effect. A difference-in-differences approach inspired by the career concerns literature uncovers evidence for both effects. However, the net effect of increased transparency appears to be a more informative deliberation process.
    Keywords: Monetary policy, deliberation, FOMC, transparency, career concerns
    JEL: E52 E58 D78
    Date: 2014–05

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