nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒08‒09
eight papers chosen by
Stan Miles
Thompson Rivers University

  1. Euro Exchange Rate Forecasting with Differential Neural Networks with an Extended Tracking Procedure By Ortiz-Arango, Francisco; Cabrera-Llanos, Agustín I.; Venegas-Martínez, Francisco
  2. Optimally Differentiated Carbon Prices for Unilateral Climate Policy By Stefan Boeters
  3. The South African Bio ethanol blend mandate and its implications on regional agricultural markets and welfare By Sukati, Mphumuzi
  4. Disaggregating Electricity Generation Technologies in CGE Models By Vipin Arora; Yiyong Cai
  5. Robust Measurement of National Technological Progress By Stefano Zambelli; Thomas Fredholm; Ragupathy Venkatachalam
  6. Ex-ante versus ex-post assessments of the economic benefits of Free Trade Agreements: Lessons from the North American Free Trade Agreement (NAFTA) By Grumiller, Jan-Augustin
  7. Optimal capacitated ring trees By HILL, Alessandro; VOß, Stefan
  8. Financial Activities Taxes, Bank Levies and Systemic Risk By Giuseppina Cannas; Jessica Cariboni; Massimo Marchesi; Gaëtan Nicodème; Marco Petracco Giudici; Stefano Zedda

  1. By: Ortiz-Arango, Francisco; Cabrera-Llanos, Agustín I.; Venegas-Martínez, Francisco
    Abstract: This paper is aimed at developing a new kind of non-parametrical artificial neural network useful to forecast exchange rates. To do this, we departure from the so-called Differential or Dynamic neural Networks (DNN) and extend the tracking procedure. Under this approach, we examine the daily closing values of the exchange rates of the Euro against the US dollar, the Japanese yen and the British pound. With our proposal, Extended DNN or EDNN, we perform the tracking procedure from February 15, 1999, to August 31, 2013, and, subsequently, the forecasting procedure from September 2 to September 13, 2013. The accuracy of the obtained results is remarkable, since the percentage of the error in the predicted values is within the range from 0.001% to 0.69% in the forecasting period.
    Keywords: Exchange rates, artificial neural network, differential neural network, tracking and forecasting.
    JEL: G17
    Date: 2014–08–01
  2. By: Stefan Boeters
    Abstract: Economic thought on climate policy as an instance of environmental regulation is strongly influenced by the principle of a uniform carbon price. Economists acknowledge that this principle breaks down in a “second-best†world with other distortions, such as taxes and market power in domestic and international markets. However, systematic analysis of this point in the economic climate policy literature is scarce. In the present paper, a computable general equilibrium (CGE) set-up is chosen in order to examine what pattern of differentiated carbon prices emerges as optimal in a second-best world. The CGE model WorldScan, which is considered to be representative of the class of models routinely used for numerical climate policy analysis, produces three main results: First, the optimal pattern of carbon prices is highly differentiated, ranging from almost prohibitive taxes to high subsidies (with a range of more than 1700 euros per ton of CO2). Second, the welfare gain from switching from a uniform price to optimally differentiated prices is enormous, equivalent to a 27 % emission reduction for free. Third, the most important drivers of carbon price differentiation are market power in export markets as well as taxes on consumption, intermediate inputs and domestic output. This shows that carbon price differentiation cannot be dismissed as a policy option lightly. However, before translating these findings into concrete policy advice, the relevant features of modelling pre-existing distortions in CGE models need close revision.
    JEL: Q42 Q54 H21 H23 D58
    Date: 2014–07
  3. By: Sukati, Mphumuzi
    Abstract: The paper aims to analyse the potential impact of South African Biothanol Blend mandate on SACU region’s maize and sugar production (referred to as bioethanol crops commodities), trade and overall welfare outcomes. The study has been necessitated by the importance of maize as a staple food for the Southern African region and the importance of sugar to some of the SACU countries’ economies especially that of Swaziland. The simulation experiment has been an artificial decrease in cereal and sugar cane output in South Africa due to their diversion to bioethanol production, with a corresponding increase in petroleum output by a factor proportional to the blend mandate in place. This simulation has been undertaken using the GTAP7 model and database. Simulations results show that South African production of bioethanol and its blending to fuel will not result in major negative welfare changes in South Africa. However, production of bieothanol from maize negatively affects the rest of SACU member states in terms of welfare outcome and cereal prices. On the other hand, South Africa experience the most welfare benefits from maize based bioethanol. Production of bioethanol from sugar cane improves welfare in the rest of SACU region, such welfare envisaged to accumulate more to Swaziland, one of the region’s major low cost sugar producer and exporter. Bioethanol crops commodities industry output and trade changes for the rest of SACU member states trend with the level of commitment of that commodity in the South African bioethanol production and blending programme as expected.
    Keywords: Bioethanol Blend Mandate, GTAP 7, Welfare Outcomes
    JEL: F1 F13 O13 Q1 Q16 Q2 Q28 Q4 Q48
    Date: 2014–06–30
  4. By: Vipin Arora; Yiyong Cai
    Abstract: We illustrate the importance of disaggregating electricity generation when considering responses to environmental policies. We begin by reviewing various approaches to electric sector modelling in Computable General Equilibrium (CGE) models, and then clarify and expand upon the structure and calibration of the “technology bundle” approach. We also simulate the proposed U.S. Clear Power Plan and show how a disaggregate electricity sector can change results. Our simulations indicate that both the ability to switch between generation technologies and the manner of aggregation in electricity production are important for quantifying the economic costs of the plan.
    Date: 2014–07
  5. By: Stefano Zambelli; Thomas Fredholm; Ragupathy Venkatachalam
    Abstract: We propose a measure of technological progress based on the information embedded in standard input-output tables. A connection is established between the quantities necessary as inputs, the associated output and auxiliary prices. It is argued that the wage-profit frontiers and the associated production prices together provide a robust basis for measuring technological progress and productivities. The computation of the wage-profit frontiers is a non-trivial exercise because of high combinatorial complexity. An algorithm that renders this computation feasible is presented. We analyze technological progress and productivities among 30 countries between 1995-2009 using the latest multi-regional input-output data.
    Keywords: Technological Change, Input–Output analysis, Wage Profit Frontier, Production Prices, Computational Techniques
    JEL: C61 C63 C67 O47
    Date: 2014
  6. By: Grumiller, Jan-Augustin
    Abstract: Much of the current discussion about the Transatlantic Trade and Investment Partnership (TTIP) is focused on the potential welfare and employment effects. Supporters of TTIP often support their argument by highlighting the optimistic results of computable general equilibrium (CGE) models. CGE-models are the methodological backbone of most ex-ante impact assessments of free-trade agreements, as for instance published by the European Commission. The objective of this paper is to assess the accurateness of ex-ante studies by scrutinizing the example of the North American Free Trade Agreement (NAFTA). The analysis suggests that a considerable gap exists between ex-ante projections and ex-post evaluations with regard to NAFTA's effects on welfare, wages and employment. Most exante models had a tendency to overestimate the benefits and underestimate the costs of free-trade. The experience of NAFTA reveals the weak credibility of ex-ante simulations. Policy makers should thus treat the formers' results with the appropriate skepticism. --
    Date: 2014
  7. By: HILL, Alessandro; VOß, Stefan
    Abstract: We study a new network design model combining ring and tree structures under capacity constraints. The solution topology of this capacitated ring tree problem (CRTP) is based on ring trees which are the union of trees and 1-trees. The objective is the minimization of edge costs but could also incorporate other types of measures. This overall problem generalizes prominent capacitated vehicle routing and Steiner tree problem variants. Two customer types have to be connected to a distributor ensuring single and double node connectivity, respectively, while installing optional Steiner nodes. The number of ring trees and the number of customers supplied by such a single structure are bounded. After embedding this combinatorial optimization model in existing network design concepts, we develop a mathematical formulation and introduce several valid inequalities for the CRTP that are separated in our exact algorithm. Additionally, we use local search techniques to tighten the obtained upper bounds. For a set of literature-derived instances we consider various reliability scenarios and present computational results.
    Keywords: Capacitated ring tree problem, Steiner tree, Ring tree, Vehicle routing, Survivable network design, Integer programming
    Date: 2014–07
  8. By: Giuseppina Cannas (Joint Research Centre of the European Commission); Jessica Cariboni (Joint Research Centre of the European Commission); Massimo Marchesi (European Commission); Gaëtan Nicodème (European Commission); Marco Petracco Giudici (Joint Research Centre of the European Commission); Stefano Zedda (Joint Research Centre of the European Commission)
    Abstract: The question of additional taxes on banking institutions has recently been debated.At the same time, financial regulation in the banking sector is undergoing many changes aimed at strengthening financial stability. This paper uses SYMBOL, a micro-simulation model of the banking system, to estimate contributions to systemic risk of individual banks under various future regulatory scenarios and compares them to their potential tax liabilities under alternative designs of Financial Activity Taxes and Bank Levies. The results show that when contagion is not avoided, all taxes perform about the same way. However, when contagion is avoided, bank levies outperform FATs.
    Keywords: Taxation; Banks; Financial Activity Tax; Bank levy; Systemic Risk; Regulation
    JEL: F23 G32 H25 R38
    Date: 2014–04

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