New Economics Papers
on Computational Economics
Issue of 2014‒06‒28
fourteen papers chosen by

  1. Spot Price Modelling of Industrial Metals – An heterogeneous agent based model for Copper By Helyette Geman; Matthias Scheiber
  2. Semiclassical approximation in stochastic optimal control I. Portfolio construction problem By Sakda Chaiworawitkul; Patrick S. Hagan; Andrew Lesniewski
  3. The impacts of temporary and anticipated tourism spending By Grant Allan; Patrizio Lecca; Kim Swales
  4. Die Bewertung der Umstellung einer einjährigen Ackerkultur auf den Anbau von Miscanthus: Eine Anwendung des Realoptionsansatzes By Diekmann, Anton; Wolbert-Haverkamp, Matthias; Mußhoff, Oliver
  5. An impact analysis of climate change and adaptation policies on the forestry sector in Quebec. A dynamic macro-micro framework By Dorothée Boccanfuso; Véronique Gosselin; Jonathan Goyette; Luc Savard; Clovis Tanekou Mangoua
  6. A dynamic CGE modelling approach for analyzing trade-offs in climate change policy options: the case of Green Climate Fund. By Antimiani Alessandro; Valeria Costantini; Anil Markandya; Chiara Martini; Alessandro Palma; Maria Cristina Tommasino
  7. The Impact on the Farm Sector and Wider Rural Economy of Switching from Historic to Regional Single Farm Payments in North-East Scotland By Vellinga, Nico; Matthews, Keith; Roberts, Deborah; Thomson, Ken
  8. Using an Artificial Financial Market for studying a Cryptocurrency Market By Luisanna Cocco; Giulio Concas; Michele Marchesi
  9. Assessing energy price induced improvements in efficiency of capital in OECD manufacturing industries By Steinbuks, Jevgenijs; Neuhoff, Karsten
  10. How might a central bank report uncertainty? By Fair, Ray C.
  11. Probabilistic flows of inhabitants in urban areas and self-organization in housing markets By Takao Hishikawa; Jun-ichi Inoue
  12. Does anti-competitive service sector regulation harm exporters? Evidence from manufacturing firms in Spain By Monica Correa Lopez; Rafael Domenech
  13. Estimating the future local public school expenditures in Japan - the impacts of scale diseconomies and the change in faculty age structure - By Nobuo Akai; Miki Suhara
  14. On Understanding the Cyclical Behavior of the Price Level and Inflation By Joseph Haslag; William Brock

  1. By: Helyette Geman (Department of Economics, Mathematics & Statistics, Birkbeck); Matthias Scheiber (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We will show in this paper the role of inventories in explaining copper price volatility. Using a three factor model we derive a fundamental long-term value for copper. Second, we emphasis the significance of this fundamental long-term value by considering an agent based model approach in which mean-reversion focused fundamental investors trade with chartists who follow price trends. We show that fundamental investors take increasing positions in copper when the spot price of copper deviated from its fundamental value (i.e. the fundamental value is higher than the spot price) and chartists loose relative significance.
    Keywords: Heterogeneous agent based modelling, copper spot price modelling, 3 factor stochastic volatility model, Runge Kutta, Kalman Filter.
    Date: 2014–05
  2. By: Sakda Chaiworawitkul; Patrick S. Hagan; Andrew Lesniewski
    Abstract: This is the first in a series of papers in which we study an efficient approximation scheme for solving the Hamilton-Jacobi-Bellman equation for multi-dimensional problems in stochastic control theory. The method is a combination of a WKB style asymptotic expansion of the value function, which reduces the second order HJB partial differential equation to a hierarchy of first order PDEs, followed by a numerical algorithm to solve the first few of the resulting first order PDEs. This method is applicable to stochastic systems with a relatively large number of degrees of freedom, and does not seem to suffer from the curse of dimensionality. Computer code implementation of the method using modest computational resources runs essentially in real time. We apply the method to solve a general portfolio construction problem.
    Date: 2014–06
  3. By: Grant Allan (Department of Economics, University of Strathclyde); Patrizio Lecca (Department of Economics, University of Strathclyde); Kim Swales (Department of Economics, University of Strathclyde)
    Abstract: Part of the local economic impact of a major sporting event comes from the associated temporary tourism expenditures. Typically demand-driven Input-Output (IO) methods are used to quantify the impacts of such expenditures. However, IO modelling has specific weaknesses when measuring temporary tourism impacts; particular problems lie in its treatment of factor supplies and its lack of dynamics. Recent work argues that Computable General Equilibrium (CGE) analysis is more appropriate and this has been widely applied. Neglected in this literature however is an understanding of the role that behavioural characteristics and factor supply assumptions play in determining the economic impact of tourist expenditures, particularly where expenditures are temporary (ie of limited duration) and anticipated (ie known in advance). This paper uses a CGE model for Scotland in which agents can have myopic- or forward-looking behaviours and shows how these alternative specifications affect the timing and scale of the economic impacts from anticipated and temporary tourism expenditure. The tourism shock analysed is of a scale expected for the Commonwealth Games to be held in Glasgow in 2014. The model shows how "pre-shock" and "legacy" effects - impacts before and after the shock - arise and their quantitative importance. Using the forward-looking model the paper calculates the optimal degree of pre-announcement.
    Keywords: economic impact, CGE modelling, mega-events
    JEL: C68 L83 R11 R13
    Date: 2014–06
  4. By: Diekmann, Anton; Wolbert-Haverkamp, Matthias; Mußhoff, Oliver
    Abstract: Viele Studien zeigen, dass Miscanthus (MSC) im Vergleich zum klassischen Ackerbau ökonomisch vorteilhaft sein kann. Dennoch bauen Landwirte nur vereinzelt MSC an. Es hat daher den Anschein, dass Landwirte der traditionellen Investitionstheorie nicht folgen. Im Unterschied zur traditionellen Investitionstheorie berücksichtigt der Realoptionsansatz (ROA) Irreversibilität und zeitliche Flexibilität einer Investition sowie die Unsicherheit hinsichtlich der Rückflüsse. Aus diesem Grund können die Investitionstrigger des ROA, ab denen ein Entscheider investieren sollte, höher als die der traditionellen Investitionstheorie sein. Häufig wird daraus in nicht MSC-Kontexten geschlussfolgert, dass der ROA Investitionszurückhaltung erklären kann. In vielen Anwendungen wird allerdings die Desinvestitionsmöglichkeit vernachlässigt. Es besteht daher die Gefahr, dass die gemäß ROA berechneten Investitionstrigger überhöht sind. Wir sind die ersten, die den ROA auf die Umstellungsmöglichkeit von klassischem Ackerbau auf MSC anwenden und mit Hilfe einer Kombination aus genetischem Algorithmus und stochastischer Simulation Investitions- bzw. Umstellungstrigger (mit und ohne Rückumstellungsmöglichkeit) bestimmen. Unsere Ergebnisse zeigen, dass die Umstellungstrigger des ROA bedeutend höher sind als die der traditionellen Investitionstheorie. Allerdings führt die Vernachlässigung der Rückumstellungsmöglichkeit zu einer Überschätzung der Umstellungszurückhaltung. Ein zunehmender Grad an Risikoaversion führt zu einer Verringerung der Umstellungstrigger beider Theorien. Es kann geschlussfolgert werden, dass der ROA die Zurückhaltung der Landwirte bei der Umstellung auf MSC zumindest teilweise erklären kann. --
    Keywords: Landnutzung,traditionelle Investitionstheorie,Realoptionsansatz,genetischer Algorithmus,Miscanthus,Weizen
    Date: 2014
  5. By: Dorothée Boccanfuso (Département d'Économique, Université de Sherbrooke); Véronique Gosselin (GREDI, Université de Sherbrooke); Jonathan Goyette (Département d'Économique, Université de Sherbrooke); Luc Savard (Département d'Économique, Université de Sherbrooke); Clovis Tanekou Mangoua (GREDI, Université de Sherbrooke)
    Abstract: Quebec’s forests represent 20% of the Canadian forest and 2% of world forests. They play a major role for habitat preservation, supplying goods and services to the population and hence contributing to the economy of this Canadian province. Climate change (CC) will have an impact on forests through increased droughts, warmer summers and winters or infestations such as the pine beetle (British Columbia and New Jersey). In our study we analyze the economic and distributional impact of CC on the forest industry in Quebec. To achieve this, we simulate two productivity changes in the forestry sector and two potential adaptation programs that could be implemented to help the sector cope with CC direct and indirect effects. Our analysis is performed over a 40 year using a recursive dynamic CGE-micro-simulation framework. We show that the economic impacts on the forest industry are relatively substantial but quite small for the rest of the economy. Moreover, the distributional impacts are present and significant but they are weak (below 0.1%).
    Keywords: Distributive analysis, computable general equilibrium model, micro-simulation model, climate change, adaptation policies
    JEL: C68 D58 I32 O13 Q54 Q56
    Date: 2014–05
  6. By: Antimiani Alessandro (Istituto Nazionale di Economia Agraria (INEA), Roma (Italy).); Valeria Costantini (Department of Economics, Roma Tre University, Roma (Italy).); Anil Markandya (Basque Centre for Climate Change (BC3), Spain.); Chiara Martini (Agenzia nazionale per le nuove tecnologie, l’energia e lo sviluppo economico sostenibile (ENEA), Italy.); Alessandro Palma (Department of Economics, Roma Tre University, Roma (Italy).); Maria Cristina Tommasino (Agenzia nazionale per le nuove tecnologie, l’energia e lo sviluppo economico sostenibile (ENEA), Italy.)
    Abstract: We investigate the trade-offs between economic growth and low carbon targets for developing and developed countries in the period up to 2035. Policy options are evaluated with an original version of the dynamic CGE model GDynE. Abatement costs appear to be strongly detrimental to conomic growth for developing countries. We investigate options for reducing these costs that are consistent with a green growth strategy. We show that Green Climate Fund financed through a levy on carbon taxation can benefit all parties, and larger benefits are associated with investment of the Green Climate Fund to foster energy efficiency in developing countries.
    Keywords: Climate Change Policies, Green Growth, Developing Countries, Dynamic CGE Energy Model, Green Climate Fund.
    JEL: C68 H23 O44 Q54
    Date: 2014–06
  7. By: Vellinga, Nico; Matthews, Keith; Roberts, Deborah; Thomson, Ken
    Abstract: One of the key features of the CAP 2014 reforms is the requirement for Member States currently distributing direct payments to farmers on the basis of historic support levels to switch an area-based payment scheme. This paper explores effects of this shift for both the farm sector and the wider rural economy in North-East Scotland. Analysis is carried out in two stages: First, the changes in payments for individual farm businesses are estimated based on the integration of several agricultural datasets. Second, the wider economy impacts are estimated using an agriculture-focussed static regional CGE model. The farm-level analysis shows that the North-East Scotland region is likely to suffer a significant net payment loss from the change in payment basis; however, there are gainers as well as losers both between and within farm types. The CGE analysis suggests that the wider economic impacts of the change in payments will be limited, in part due to the relatively small size of the sector in the overall economy. Within the agricultural sector itself, real agricultural GDP falls by 0.55%. Small cropping farm households suffer the largest overall income drop (-9.18%), with output from large “other” farm types falling most (-23.59%). Land rents fall across all farm types, and land switches into forestry. In terms of the wider agri-food chain, demand for agricultural intermediate inputs falls by 3% while the impacts on the downstream food sectors are more limited with meat processing predicted to fall most in percentage terms (-1.47%) due to increased raw imports from other regions. The paper concludes by suggesting areas for further research.
    Keywords: CAP reform, farm businesses, CGE, Agriculture, Agribusiness, Agricultural and Food Policy, Political Economy, Q1,
    Date: 2014–04
  8. By: Luisanna Cocco; Giulio Concas; Michele Marchesi
    Abstract: This paper presents an agent-based artificial cryptocurrency market in which heterogeneous agents buy or sell cryptocurrencies, in particular Bitcoins. In this market, there are two typologies of agents, Random Traders and Chartists, which interact with each other by trading Bitcoins. Each agent is initially endowed with a finite amount of crypto and/or fiat cash and issues buy and sell orders, according to her strategy and resources. The number of Bitcoins increases over time with a rate proportional to the real one, even if the mining process is not explicitly modelled. The model proposed is able to reproduce some of the real statistical properties of the price absolute returns observed in the Bitcoin real market. In particular, it is able to reproduce the autocorrelation of the absolute returns, and their cumulative distribution function. The simulator has been implemented using object-oriented technology, and could be considered a valid starting point to study and analyse the cryptocurrency market and its future evolutions.
    Date: 2014–06
  9. By: Steinbuks, Jevgenijs; Neuhoff, Karsten
    Abstract: To assess how capital stocks adapt to energy price changes, it is necessary to account for the impacts on different vintages of capital and to account separately for price-induced and autonomous improvements in the energy efficiency of capital stock. The results of econometric analysis for five manufacturing industries in 19 OECD countries between 1990 and 2005 indicate that higher energy prices resulted in smaller energy use due to both improved energy efficiency of capital stock and reduced demand for the energy input. The investment response to energy prices varied considerably across manufacturing industries, being more significant in energy-intensive sectors. The results of policy simulations indicate that a carbon tax can deliver significant reductions in energy consumption in the medium run with modest declines in energy-using capital stock.
    Keywords: Energy Production and Transportation,Political Economy,Climate Change Economics,Economic Theory&Research,Markets and Market Access
    Date: 2014–06–01
  10. By: Fair, Ray C.
    Abstract: An important question for central banks is how they should report the uncertainty of their forecasts. This paper discusses a way in which a central bank could report the uncertainty of its forecasts in a world in which it used a single macroeconometric model to make its forecasts and guide its policies. Suggestions are then made as to what might be feasible for a central bank to report given that it is unlikely to be willing to commit to a single model. A particular model is used as an illustration. --
    Keywords: central bank,uncertainty,stochastic simulation
    JEL: E50
    Date: 2014
  11. By: Takao Hishikawa; Jun-ichi Inoue
    Abstract: We propose a simple probabilistic model to explain the spatial structure of the rent distribution of housing market in city of Sapporo. Here we modify the mathematical model proposed by Gauvin et. al. Especially, we consider the competition between two distances, namely, the distance between house and center, and the distance between house and office. Computer simulations are carried out to reveal the self-organized spatial structure appearing in the rent distribution. We also compare the resulting distribution with empirical rent distribution in Sapporo as an example of cities designated by ordinance. We find that the lowest ranking agents (from the viewpoint of the lowest `willing to pay') are swept away from relatively attractive regions and make several their own `communities' at low offering price locations in the city.
    Date: 2014–06
  12. By: Monica Correa Lopez; Rafael Domenech
    Abstract: In a panel study of firm-level data from Spanish manufacturers, we show that reducing anti-competitive regulation in the provision of upstream services has a positive and sizeable effect on the volume of exports of downstream firms. Our estimates indicate that deregulation is very beneficial for the export performance of large corporations, especially if they are foreign-owned multinationals, while the evidence for SMEs is much weaker. Hence, firm characteristics matter for the connection between regulation and exports. Simulation exercises suggest that large firms increased their volume of exports by an average of 49% as a result of deregulation, such that the industries that benefited the most were typically more dependent on service inputs. The improvements in the regulatory framework of transportation services and energy provision that took place over the 1990s and 2000s in Spain had particularly strong effects on the volume of foreign sales.
    Keywords: Exports, Service regulation, Margins of trade, Firm size
    JEL: F14 L43 F23 D24
    Date: 2014–06
  13. By: Nobuo Akai (Osaka School of International Public Policy, Osaka University); Miki Suhara (Strategic Planning Office, Institute of Academic Initiatives, Osaka University)
    Abstract: Decrease in the future number of students due to the low birth rate could affect public educational expenditures in Japan? Is there any regional difference? This paper simulates the future amount of local public primary, junior high, and high school expenditures in each Japanese prefecture. More specifically, we focus on faculty costs which consist of quite a large share of school expenditures. We examine the effect of economies of scale through the change in class/school size, and the impact of the shift in the faculty age distribution on the future faculty costs per student. We also investigate regional disparities concerning the future fiscal burden.
    Keywords: the Industrial Revolution; local educational expenditure, faculty costs, scale diseconomies, regional disparity
    JEL: H52 H72 I22
    Date: 2014–06
  14. By: Joseph Haslag (Department of Economics, University of Missouri-Columbia); William Brock (Department of Economics, University of Missouri-Columbia)
    Abstract: In this paper, we examine the relationship between the price level and output and the inflation rate and output at business-cycle frequencies. In the first part of the paper, we develop a methodological approach to characterizing joint business cycle correlations. In particular, we are interested in providing a characterization of the frequency that a pair of correlation coefficients will occur. We apply this methodology to the contemporaneous correlation between the price level and output and between the inflation rate and output. We apply linear filters to the cyclical components, create a time series and compute the correlations. It is straightforward to construct histograms of the two correlation co-efficients. In the second part, we specify a model economy with a form of rational inattention. In this setting, we perform numerical simulations to determine if the model economy can generate correlations quantitatively similar to those observed in the data. It can.
    Keywords: countercyclical price level, acyclical inflation, phase shift, model uncertainty
    JEL: C82 E31 E32
    Date: 2014–03–04

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