nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒08‒25
ten papers chosen by

  1. Design of Supply Chain Networks with Supply Disruptions using Genetic Algorithm By Taha, Raghda; Abdallah, Khaled; Sadek, Yomma; El-Kharbotly, Amin; Afia, Nahid
  2. Complex Networks Analysis of European International Trade: An Agent-Based Model By Kırer, Hale; Çırpıcı, Yasemin; Eren, Ercan
  3. Economic Impact of Climate Change on the Turkish Economy: Selected Results from CGE Applications By Dudu, Hasan; Çakmak, Erol Hasan
  4. Modeling Firm Heterogeneity in International Trade: Do Structural Effects Matter? By Roberto Roson; Kazuhiko Oyamada
  5. The Effect of Corporate Tax Rate Reduction: A simulation analysis with a small open economy DSGE model for Japan (Japanese) By HASUMI Ryo
  6. Introduction. Improving the Toolbox: New Advances in Agent-Based and Computational Models By Jean-Luc Gaffard; Mauro Napoletano
  7. Contagious Synchronization and Endogenous Network Formation in Financial Networks By Christoph Aymanns and Co-Pierre Georg
  8. Ecosystems - Burden or Bounty? By Richard Damania; Pasquale Lucio Scandizzo; Ann Jeannette Glauber
  9. A Monte Carlo Method using PDE Expansions for a Diversifed Equity Index Model By David Heath; Eckhard Platen
  10. China's regional vulnerability to drought and its mitigation strategies under climate change: Data envelopment analysis and analytic hierarchy process integrated approach By Xiao-Chen Yuan; Qian Wang; Ke Wang; Bing Wang; Ju-Liang Jin; Yi-Ming Wei

  1. By: Taha, Raghda; Abdallah, Khaled; Sadek, Yomma; El-Kharbotly, Amin; Afia, Nahid
    Abstract: The design of supply chain networks subject to disruptions is tackled. A genetic algorithm with the objective of minimizing the design cost and regret cost is developed to achieve a reliable supply chain network. The improvement of supply chain network reliability is measured against the supply chain cost.
    Keywords: Supply chain, Disruptions, Genetic Algorithm
    JEL: C6 C61 C63
    Date: 2014–05–10
  2. By: Kırer, Hale (Balıkesir University, Bandırma Faculty of Economics and Administrative Sciences, Department of Econometrics); Çırpıcı, Yasemin (Yıldız Technical University, Faculty of Economics and Administrative Sciences, Department of Economics); Eren, Ercan (Yıldız Technical University, Faculty of Economics and Administrative Sciences, Department of Economics)
    Abstract: Economic systems involve many heterogeneous agents and their complex interactions. These lead many studies, in recent years, to focus on the complex networks. Agent based modelling and simulation (ABMS) is a powerful tool for analyzing such systems. This model enables interacting agents to assess individually their positions and makes decisions on the basis of a set of rules that configure the system. International trade can be thought of as a complex network since it consists of interacting heterogeneous agents (countries) with special characteristics. Network representation also makes it possible to analyze indirect trade interaction among countries. In this study the network of international trade of European countries is modelled by using an agent-based model. The aim is to display briefly the network structure of the European international trade.
    Keywords: Complex Networks, Agent-Based Modelling, Complexity Economics, International Trade.
    JEL: C63 C69 F14
    Date: 2013
  3. By: Dudu, Hasan (EC JRC-JRC IPTS, Sevilla, Spain); Çakmak, Erol Hasan (TED University, Department of Economics, Ankara, Turkey)
    Abstract: This study quantifies the economic effects of climate change on Turkey. We use an integrated framework that combines a static regional and a dynamic national economy-wide model with a crop water requirement model. Results suggest that the economic effects of climate change will not be significant until late 2030s. This provides Turkey an excellent opportunity to design and implement appropriate adaptation policies. The impact varies across regions. Agriculture and food production will be heavily affected, and irrigated production will decline as water stress increases. Together, this causes significant decline in agricultural production and national welfare. Part of agriculture’s decline is compensated by imports, thus deteriorating Turkey’s food trade balance.
    Keywords: Computable general equilibrium, climate change, agriculture, productivity
    JEL: C68 D24 Q1 Q54
    Date: 2013
  4. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Kazuhiko Oyamada (Institute of Developing Economies, Japan External Trade Organization)
    Abstract: This paper analyzes the qualitative properties of a multisectoral, multiregional computable general equilibrium model where some industries include heterogeneous firms as in Melitz (2003). The model, formulated according to Roson, R. and Oyamada (2014), adds endogenous productivity effects to a standard Walras-Ricardian framework. We argue that the inclusion of such effects changes the magnitude and distribution of welfare benefits obtainable by reductions in trade barriers, due to of comparative advantages. Abstract We illustrate the point through a numerical example, in which alternative model formulations are assessed. A standard neoclassic GE model, a basic Melitz model and a hybrid model are then compared. The three model versions are all calibrated with the same data set and an identical simulation experiment (a 50% reduction of transport costs between two regions) is carried out in the three cases. The results show that the hybrid model displays the largest welfare gains, as it combines Ricardian comparative advantages with Melitz average productivity improvements. However, they also show that new effects, not present in the original Ricardo and Melitz frameworks, are at a work.
    Keywords: Computable General Equilibrium Models, Melitz, Firm Heterogeneity, International Trade.
    JEL: C63 C68 D51 D58 F12 L11
    Date: 2014
  5. By: HASUMI Ryo
    Abstract: This paper studies the short-term and long-term effects of tax policy changes on the Japanese economy by using a small open economy dynamic stochastic general equilibrium (DSGE) model with endogenous stochastic trends. The parameters of the model are estimated by a usual Bayesian method based on Japanese quarterly macroeconomic data from 1980 to 2010. A simulation analysis of a 1% to gross domestic product (GDP) scale corporate tax reduction has been implemented, in which fiscal neutrality is kept by raising the consumption tax rate. The real GDP increases by about 1.1% and the consumer price index (CPI) (excluding the effect of the consumption tax change) rises by about 0.2% within two years. This result suggests that such tax policy change induces short-term increases in the growth and inflation rate.
    Date: 2014–08
  6. By: Jean-Luc Gaffard (OFCE); Mauro Napoletano (OFCE)
    Abstract: Are current economic models well equipped to provide useful policy prescriptions? Many economists would have certainly answered, “yes” before the recent Global Recession. This economic crisis has not only demonstrated the importance of banking and financial markets for the dynamics of real economies. It has also revealed the inadequacy of the dominant theoretical framework. Standard models have indeed failed to forecast the advent of the crisis. In addition, they have been unable to indicate a therapy able to restore economic growth (...).
    Date: 2012–09
  7. By: Christoph Aymanns and Co-Pierre Georg
    Abstract: When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that the probability that banks synchronize their investment strategy on a state non-matching action critically depends on the weighting between private and social belief. This effect is alleviated when banks choose their peers endogenously in a network formation process, internalizing the externalities arising from social learning.
    Keywords: social learning, endogenous financial networks, multi-agent simulations, systemic risk
    JEL: G21 C73 D53 D85
    Date: 2014
  8. By: Richard Damania (World Bank); Pasquale Lucio Scandizzo (CEIS, Università di Roma "Tor Vergata"); Ann Jeannette Glauber (World Bank)
    Abstract: This paper presents a somewhat novel approach to explore the economic contribution of ecosystems. It develops linked models to capture connections between resource stocks and flows and the resulting micro and macroeconomic impacts. A bioeconomic model is developed that is imbedded into a computable general equilibrium (CGE) model. Incorporating imperfect regulation, the bioeconomic model characterizes optimal policies, while the CGE model explores the economy-wide consequences of possible changes to the ecosystem. The model is parameterized and calibrated to the case of the Serengeti ecosystem which is perhaps the most intensively researched biome with a relative abundance of data. This ecosystem is also undergoing rapid change from a host of factors related to developments within and around the protected area system. The analysis identifies the contribution of the ecosystem to the economy and finds that changes in tourism and bushmeat hunting have surprisingly diffuse economy-wide impacts, that are especially large in the rural sector. To guard against overstatement, ecosystem impacts are under-stated relative to other effects. The results suggest that linkages to the natural resource sector (backward and forward multipliers) are important and neglecting these may lead to biased estimates.
    JEL: Q57 Q59 Q20 Q29
    Date: 2014–08–08
  9. By: David Heath (Australian National University); Eckhard Platen (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: This paper considers a new class of Monte Carlo methods that are combined with PDE expansions for the pricing and hedging of derivative securities for multidimensional diffusion models. The proposed method combines the advantages of both PDE and Monte Carlo methods and can be directly applied to models with more than two state variables. The pricing procedure is illustrated using a three-component index model that captures some of the key features of a diversied stock index over long time periods. The method is widely applicable and is demonstrated here in the general setting of the benchmark approach, where spatial boundary limiting conditions for the PDE need to be appropriately chosen and approximated. The PDE expansion is based on a Taylor series approximation for the underlying three-component PDE. A Monte Carlo method with variance reduction is then formulated to approximate the true solution. Almost exact simulation schemes are described for the given state variables in the model. Numerical results are presented that demonstrate the effectiveness and tractability of the proposed pricing and hedging methodology.
    Keywords: Multi-factor diffusion; Monte Carlo methods; diversified equity index, pricing PDE; exact simulation; variance reduction; benchmark approach
    JEL: G10 G13
    Date: 2014–08–01
  10. By: Xiao-Chen Yuan; Qian Wang; Ke Wang; Bing Wang; Ju-Liang Jin; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: Climate change makes extreme droughts more frequent with heavy economic losses in China, thus this study aims to evaluate China's regional vulnerability to drought and propose proper mitigation strategies for drought-vulnerable areas. In this paper, an integrated index containing exposure, sensitivity and adaptive capacity is developed to measure regional vulnerability to drought, and it is calculated by the integrated approach which combines slacks-based measure (SBM) model in data envelopment analysis (DEA) with genetic algorithm-based analytic hierarchy process (AHP). Accordingly, 65 cities in Anhui, Henan, Jiangsu and Shandong provinces of China are chosen as the study area. The results show that Anhui and Henan are more vulnerable to drought, and the proportions of cities with inefficient resilience to drought in the two provinces are 64.7% and 55.6% respectively. Compared with coastal areas, the inland regions have more drought-vulnerable cities. In addition, the cities in the south are less vulnerable to drought than those in the central and north regions. Meanwhile, we conclude that the integrated index can measure the efficiency of resilience to drought and reveal the causes of drought vulnerability. It also indicates that adequate investments in drought preparedness and promotion of water efficiency are the crucial ways for drought vulnerability reduction. Finally, this study proposes some policy recommendations to alleviate the impacts of drought under climate change.
    Keywords: Drought vulnerability, mitigation strategy, data envelopment analysis, analytic hierarchy process, genetic algorithm
    JEL: Q54 C61
    Date: 2013–02

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