nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒08‒28
seven papers chosen by
Stan Miles
Thompson Rivers University

  1. The Inter-Regional System of Analysis for ASEAN: A Manual By Ditya A. Nurdianto; Budy Resosudarmo
  2. Position-Limit Design for the CSI 300 Futures Markets By Lijian Wei; Wei Zhang; Xiong Xiong; Lei Shi
  3. Economic Implications of Deeper South Asian-Southeast Asian Integration: A CGE Approach By Wignaraja, Ganeshan; Morgan, Peter; Plummer, Michael; Zhai, Fan
  4. Land Use in Rural New Zealand: Spatial Land Use, Land-use Change, and Model Validation By Simon Anastasiadis; Suzi Kerr; Wei Zhang; Corey Allan; William Power
  5. Accelerated Portfolio Optimization with Conditional Value-at-Risk Constraints using a Cutting-Plane Method By Georg Hofmann
  6. Defining Clusters of Related Industries By Mercedes Delgado; Michael E. Porter; Scott Stern
  7. An efficient heuristic for the multi-product satiating newsboy problem By Khanra, Avijit

  1. By: Ditya A. Nurdianto (Ministry of Foreign Affairs, Republic of Indonesia, Jakarta, Indonesia); Budy Resosudarmo (Indonesia Project, Arndt-Corden Department of Economics, Crawford School of Public Policy, Australian National University, Canberra, Australia)
    Abstract: The Inter-Regional System of Analysis for ASEAN (IRSA-ASEAN) is a static, multi-country, computable general equilibrium (CGE) model. It is a unique model constructed to understand the impact of coordinated and non-coordinated policies, e.g. energy subsidy reduction and carbon tax implementation, on the economic and environmental performances of six of the ten member countriesof ASEAN, namely Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Although it is robust enough to be an insightful tool for policy analysis in other issues, e.g. trade, the IRSA-ASEAN model contains a unique feature that makes it particularly valuable for policies related to environment and energy sectors, namely endogenized revenue recycling mechanisms. This paper is intended to become a technical manual for the IRSA-ASEAN model that will help to better analyze empirical results in the authors’ other papers.
    Keywords: CGE, ASEAN
    JEL: D58
    Date: 2014–08
  2. By: Lijian Wei (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Wei Zhang (Tianjin University); Xiong Xiong (Tianjin University); Lei Shi (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: The aim of this paper is to find the optimal level of position limit for the Chinese Stock Index (CSI) 300 futures market. A small position limit helps to prevent price manipulations in the spot market, thus able to keep the magnitude of instantaneous price changes within policy makers' tolerance range. However, setting the position limit too small may also have negative effects on market quality. We propose an articial limit order market with heterogeneous and interacting agents to examine the impact of different levels of position limit on market quality, which is measured by liquidity, return volatility, efficiency of information dissemination and trading welfare. The simulation model is based on realistic trading mechanism, investor structure and order submission behavior observed in the CSI 300 futures market. Our results show that based on the liquidity condition in September 2010, raising the position limit from 100 to 300 can signicantly improve market quality and at the same time keep maximum absolute price change per 5 seconds under the 2% tolerance level. However, the improvement becomes only marginal when further increasing the position limit beyond 300. Therefore, we believe that raising the position limit a moderate level can enhance the functionality of the CSI 300 futures market, which benets the development of the Chinese nancial system.
    Keywords: position limit; stock index futures; agent-based modeling; market quality
    JEL: G14 C63 D44
    Date: 2014–06–01
  3. By: Wignaraja, Ganeshan (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute); Plummer, Michael (Asian Development Bank Institute); Zhai, Fan (Asian Development Bank Institute)
    Abstract: South and Southeast Asian economic integration via increased trade flows has been increasing significantly over the past 2 decades, but the level of trade continues to be relatively low. This underperformance has been due to both policy-related variables—relatively high tariff and non-tariff barriers—and high trade costs due to inefficient "hard" and "soft" infrastructure (costly transport links and problems related to trade facilitation). The goal of this study is to estimate the potential gains from South Asian–Southeast Asian economic integration using an advanced computable general equilibrium (CGE) model. The paper estimates the potential gains to be large, particularly for South Asia, assuming that the policy- and infrastructure-related variables that increase trade costs are reduced via economic cooperation and investment in connectivity. As Myanmar is a key inter-regional bridge and has recently launched ambitious, outward-oriented policy reforms, the prospects for making progress in these areas are strong. If the two regions succeed in dropping inter-regional tariffs, reducing non-tariff barriers by 50%, and decreasing South Asian–Southeast Asian trade costs by 15%—which this paper suggests is ambitious but attainable—welfare in South Asia and Southeast Asia would rise by 8.9% and 6.4% of gross domestic product, respectively, by 2030 relative to the baseline. These gains would be driven by rising exports and competitiveness, particularly for South Asia, whose exports would rise by two thirds (64% relative to the baseline). Hence, the paper concludes that improvements in connectivity would justify a high level of investment. Moreover, it supports a two-track approach to integration in South Asia, i.e., deepening intra-regional cooperation together with building links to Southeast Asia.
    Keywords: south asia-southeast asian regional integration; inter-regional trade; cge analysis; tariff and non-tariff barriers
    JEL: C68 F12 F13 F15 F17
    Date: 2014–08–12
  4. By: Simon Anastasiadis (Stanford University); Suzi Kerr (Motu Economic and Public Policy Research); Wei Zhang (Ministry for Primary Industries); Corey Allan (Motu Economic and Public Policy Research); William Power (GNS Science)
    Abstract: Land is an important social and economic resource. Knowing the spatial distribution of land use and the expected location of future land-use change is important to inform decision makers. This paper documents and validates the baseline land-use maps and the algorithm for spatial land-use change incorporated in the Land Use in Rural New Zealand model (LURNZ). At the time of writing, LURNZ is the only national-level land-use model of New Zealand. While developed for New Zealand, the model provides an intuitive algorithm that would be straightforward to apply to different locations and at different spatial resolutions. LURNZ is based on a heuristic model of dynamic land-use optimisation with conversion costs. It allocates land-use changes to each pixel using a combination of pixel probabilities in a deterministic algorithm and calibration to national-level changes. We simulate out of sample and compare to observed data. As a result of the model construction, we underestimate the “churn” in land use. We demonstrate that the algorithm assigns changes in land use to pixels that are similar in quality to the pixels where land-use changes are observed to occur. We also show that there is a strong positive relationship between observed territorial-authority-level dairy changes and simulated changes in dairy area.
    Keywords: Agriculture; land use; LURNZ; maps; rural; spatial; land-use model; model validation
    JEL: R52 R13 Q15 C52
    Date: 2014–08
  5. By: Georg Hofmann
    Abstract: Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this linear problem has a very large number of linear constraints, too many to be enforced in practice. In the literature this is addressed by a reformulation of the problem using so-called dummy variables. This reduces the large number of constraints in the original linear problem at the cost of increasing the number of variables. In the context of reinsurance portfolio optimization we observe that the increase in variable count can lead to situations where solving the reformulated problem takes a long time. Therefore we suggest a different approach. We solve the original linear problem with cutting-plane method: The proposed algorithm starts with the solution of a relaxed problem and then iteratively adds cuts until the solution is approximated within a preset threshold. This is a new approach. For a reinsurance case study we show that a significant reduction of necessary computer resources can be achieved.
    Date: 2014–08
  6. By: Mercedes Delgado; Michael E. Porter; Scott Stern
    Abstract: Clusters are geographic concentrations of industries related by knowledge, skills, inputs, demand, and/or other linkages. A growing body of empirical literature has shown the positive impact of clusters on regional and industry performance, including job creation, patenting, and new business formation. There is an increasing need for cluster-based data to support research, facilitate comparisons of clusters across regions, and support policymakers and practitioners in defining regional strategies. This paper develops a novel clustering algorithm that systematically generates and assesses sets of cluster definitions (i.e., groups of closely related industries). We implement the algorithm using 2009 data for U.S. industries (6-digit NAICS), and propose a new set of benchmark cluster definitions that incorporates measures of inter-industry linkages based on co-location patterns, input-output links, and similarities in labor occupations. We also illustrate the algorithm’s ability to compare alternative sets of cluster definitions by evaluating our new set against existing sets in the literature. We find that our proposed set outperforms other methods in capturing a wide range of inter-industry linkages, including grouping industries within the same 3-digit NAICS.
    JEL: R0 R1
    Date: 2014–08
  7. By: Khanra, Avijit
    Abstract: Preference of satiation of a target performance over maximization of expected performance in uncertain situations is well-documented in the economics literature. However, the newsboy problem with satiation (of a prot target) objective has not received its due attention. In the multi-product setting, solution methods available in the literature are inecient. We developed an ecient heuristic to solve the problem. The heuristic decomposes the multi-product problem into easily solvable single-product problems. We tested the heuristic with a large number of test instances. The heuristic can be adopted to solve the \target assignment problem". We demonstrated it with some numerical examples.

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