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on Computational Economics |
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Issue of 2014‒09‒05
38 papers chosen by |
| By: | Marian Rizov; Anrej Cupak; Jan Pokrivcak |
| Abstract: | We estimate a food demand system for Slovakia using a recent household budget survey data for the period 2004-2011. The Quadratic Almost Ideal Demand System (QUAIDS) augmented with demographic, regional and expenditure controls is employed based on preliminary non-parametric Engel curve analysis. In most samples demand for meat and fish and fruits and vegetables is expenditure and own-price elastic. On average all five food groups are found to be normal goods. Rural and low-income households appear more expenditure and price sensitive compared with the urban and high-income ones. Overall the food security situation in Slovakia has improved since the country’s EU accession. |
| Keywords: | Slovakia, Agricultural issues, Agent-based modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6959&r=cmp |
| By: | Idham Idham; Rizki E. Wimanda; Tarsidin; Tri Winarno |
| Abstract: | Indonesia’s economy is getting more integrated with the global economy. Potential impact of global economy shocks to domestic economy propagated through trade channel and financial channel are increasingly pronounced. Risk of sudden reversal following large capital inflows poses a serious threat to Indonesia’s economy. Meanwhile, Indonesia’s own domestic concerns regarding high current account deficit as a result of high growth of imports have yet to abate. To cope with these growing concerns on external sector, Bank Indonesia’s FPAS needs to be equipped with macroeconomic model with a more complete features of external sector. This paper explores modelling of the dynamics of current account and capital flows, and its incorporation into existing ARIMBI + Macroprudential model (a Semi Structural New Keynesian Model). Here we add external block to ARIMBI + Macroprudential model. This extension consists of two equations, i.e. current account gap and capital flows gap. In addition, output gap equation is modified to accomodate current account linkage to GDP. Meanwhile credit growth gap equation is modified to account for impact of BOP surplus/deficit to domestic liquidity. Simulation of the model shows that its impulse response function is in line with theoretical background while the behaviour of main variables is maintained to be similar with ARIMBI + Macroprudential. Through financial accelerator mechanism, procyclicality of real and financial sector is revealed. The simulation shows that policy mix can mitigate unintended impact of business cycle and financial cycle, as well as shocks from external sector. Its forecasting performance is also improved. |
| Keywords: | Indonesia, Agent-based modeling, Modeling: new developments |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6902&r=cmp |
| By: | JUNQUÉ DE FORTUNY, Enric; MARTENS, David |
| Abstract: | Many of the state-of-the-art data mining techniques introduce non-linearities in their models to cope with complex data-relationships effectively. Although such techniques are consistently included among the top classification techniques in terms of predictive power, their lack of transparency renders them useless in any domain where comprehensibility is of importance. Rule-extraction algorithms remedy this by distilling comprehensible rulesets from complex models that explain how the classifications are made. The present article considers a new rule extraction technique, based on active learning. The technique generates artificial data points around training data with low confidence in the output score, after which these are labelled by the black-box model. The main novelty of the proposed method is that it uses a pedagogical approach without making any architectural assumptions of the underlying model. It can therefore be applied to any black-box technique. Furthermore, it can generate any rule format, depending on the chosen underlying rule induction technique. In a large-scale empirical study, we demonstrate the validity of our technique to extract trees and rules from Artificial Neural Networks, Support Vector Machines and Random Forests, on 25 datasets of varying size and dimensionality. Our results show that not only do the generated rules explain the black-box models well (thereby facilitating the acceptance of such models), the proposed algorithm also performs significantly better than traditional rule induction techniques in terms of accuracy as well as fidelity. |
| Keywords: | Rule extraction, Active learning, Comprehensibility, Pedagogical |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2014016&r=cmp |
| By: | Gareth Green; Timothy J. Richards |
| Abstract: | Environmental policy decisions are dynamic in nature. Assumptions on the functional structure and rate of discounting have significant impacts on policy decisions regarding when to act and how much to invest. Environmental benefit-cost analysis historically has employed exponential discounting structure and market discount rates for evaluating environmental policy. Though here has been significant research in the lab indicating that discount functions may be hyperbolic, the research has focused primarily on monetary rewards (Lowenstein and Prelec 2002; Benhabib, Bisin and Schotter 2010). However, there has only been limited research indicating that environmental goods may also be discounted in a hyperbolic manner (Viscusi and Huber 2008; Karp 2007). We examine the structure and rate of discount functions for a variety of environmental goods to determine if people discount different environmental goods differently. We estimate a flexible discount function (Prelec) that allows us to determine the structure and rate of discounting for different types of public goods. We employ a front-end delay in the reward, similar to Anderson et al, to insure that any evidence of hyperbolic discounting is not due to having an immediate payoff. Though there have been several studies that have looked at discounting of public goods (Viscusi, Huber and Bell) and public bads (Svenson and Karlson 1989; Nikolaij and Hendrickx 2003; Hendrickx and Nicoloaij 2004; and Bohm and Pfister 2005), we examine discounting behavior for different types of public goods within the same sample. We select the public goods such that benefits differ in their level of use value and time frame of occurrence. We use three different types of public goods: improvements in public parks, improvements in water quality for aquatic life, and reductions in carbon emissions. Improvements in parks and water quality are similar in time frame, but differ in use value. Improvements in water quality and reductions in carbon emissions are similar in use value, but differ in time frame. Examining these three different public goods with slightly different characteristics will allow us to determine how people discount different types of public goods, which critical to understanding public policy choices toward environmental goods. Preliminary results indicate that people discount different types of goods differently. Mainly that people place a higher discount rate on environmental goods with use value and a lower discount rate on environmental goods with non-use value. We also find that environmental discount rates are quasi-hyperbolic in structure. |
| Keywords: | United States, Energy and environmental policy, Agent-based modeling |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5345&r=cmp |
| By: | Duc Pham-Hi |
| Abstract: | Shadow "banks" are unidentified entities operating in the financial sphere, in different countries. Therefore their lending and borrowing activities must be based on some rationally determined interest rate. We make the hypothesis that it is determined by a Reinforced Learning process and try to model this behaviour alongside a classic CCLM/DSGE model. This is a follow-up from the presentation made at EcoMod July 2012 Seville "A Markov random model of Interbank Dynamics with Filtering and Learning". We go farther in the implementation of the model. Starting from a DSGE equilibrium, forward simulations are made using Sequential Monte Carlo and interacting particle systems technique. Loopbacks are made with RL equations implemented in a dozen of heterogenous agents as "shadow bankers", each with own set of utility preferences and learning capacities. Tentatively, it appears that in a interbank liquidity shortage environment, the "shadow entities" will split up into 2 categories according to risk aversion and learning speed and their own size. I will upload a first version of the paper in February. |
| Keywords: | Global EU, Modeling: new developments, Agent-based modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6920&r=cmp |
| By: | Katerina Lisenkova; Marcel Mérette |
| Abstract: | This paper uses an OLG CGE model for the UK to illustrate the long-term effect on migration on the macroeconomy. As an illustration we use current UK government's migration target to reduce net migration "from hundreds of thousands to tens of thousands". Achieving this target would require to reduce recent net migration numbers by a factor of 2. In our simulations we compare the impact of demographic shock based on the principal ONS population projections with the lower migration scenario, which assumes that migration rates are reduced by 50%. Our results show that such a significant reduction in net migration has strong negative effect on the economy. Both level of GDP and GDP per capita fall during the simulation period. Moreover this policy has significant negative impact on public finances. As a result of growing gap between government revenues and spending, public debt increases by 8 percentage points of GDP in case or lower migration. See above See above |
| Keywords: | UK, General equilibrium modeling, Impact and scenario analysis |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:6164&r=cmp |
| By: | Mª del Carmen Delgado Lopez; M. Alejandro Cardenete Flores |
| Abstract: | Ever since the accession of Spain to the European Economic Community, Andalusia has been recipient of European Funds, hence, this paper proposes an analysis on the main macroeconomic variables of the region, that will reveal the economic impact of the European Funds received by the Autonomous Community of Andalusia during the period 2007-2013. For this objective will present a Computable General Equilibrium Model (CGE), which will assess, in different simulation scenarios, the effects on the main macroeconomic indicators.This model analyzes the effect of economic policy actions on a particular economy, satisfying the requirements of welfare and technological feasibility and given some restrictions on available resources. The results will highlight the significant contribution of the European Funds for regional growth in the period analyzed. |
| Keywords: | Andalusia (Spain), General equilibrium modeling, Impact and scenario analysis |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5103&r=cmp |
| By: | Linlin Xu; Giray \"Okten |
| Abstract: | GPU computing has become popular in computational finance and many financial institutions are moving their CPU based applications to the GPU platform. Since most Monte Carlo algorithms are embarrassingly parallel, they benefit greatly from parallel implementations, and consequently Monte Carlo has become a focal point in GPU computing. GPU speed-up examples reported in the literature often involve Monte Carlo algorithms, and there are software tools commercially available that help migrate Monte Carlo financial pricing models to GPU. We present a survey of Monte Carlo and randomized quasi-Monte Carlo methods, and discuss existing (quasi) Monte Carlo sequences in GPU libraries. We discuss specific features of GPU architecture relevant for developing efficient (quasi) Monte Carlo methods. We introduce a recent randomized quasi-Monte Carlo method, and compare it with some of the existing implementations on GPU, when they are used in pricing caplets in the LIBOR market model and mortgage backed securities. |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1408.5526&r=cmp |
| By: | Michael Hübler; Sebastian Voigt; Andreas Löschel |
| Abstract: | We assess recent Chinese climate policy proposals in a multi-region, multi-sector computable general equilibrium model with a Chinese carbon emissions trading scheme (ETS). We conduct a quantitative assessment of the Chinese emissions trading scheme (ETS) with the help of PACE (Policy Analysis based on Computable Equilibrium). PACE is a multi-sector, multi-region computable general equilibrium (CGE) model of global production, consumption, trade and energy use which is calibrated for the year 2005 proceeding in five-year time steps until the year 2030. The model is recursive dynamic, this means, it is solved for a sequence of global market equilibria. The equilibria are connected via investments and other exogenous drivers of economic growth. The benchmark data for the year 2004/2005 are taken from the GTAP 7 data base (Global Trade Analysis Project; Badri and Walmsley, 2008). Data for the dynamic business-as-usual (BAU) calibration until 2030 are taken from IEO (2008/2010). IEO (2008/2010) provides detailed regional data on fuel-specific primary energy consumption and carbon emissions. Pricing of carbon emissions with the help of an ETS results in macroeconomic effects (welfare, GDP, net exports etc.) and sectoral effects (output reductions). When the emissions intensity per GDP in 2020 is required to be 45% lower than in 2005, the model simulations indicate that the climate policy- induced welfare loss in 2020, measured as the level of GDP and welfare in 2020 under climate policy relative to their level under business-as-usual (BAU) in the same year, is about 1%. The Chinese welfare loss in 2020 slightly increases in the Chinese rate of economic growth in 2020. When keeping the emissions target fixed at the 2020 level after 2020 in absolute terms, the welfare loss will reach about 2% in 2030. If China’s annual economic growth rate is 0.5 percentage points higher (lower), the climate policy-induced welfare loss in 2030 will rise (decline) by about 0.5 percentage points. When imposing a laxer 40% intensity target, the losses will decline to 1.7% in 2030. Full auctioning of carbon allowances results in very similar macroeconomic effects as free allocation, but the results differ significantly at the sector level. Linking the Chinese to the European ETS and restricting the transfer volume to one third of the EU’s reduction effort creates at best a small benefit for China, yet with smaller sectoral output reductions than auctioning. These results highlight the importance of designing the Chinese ETS wisely. |
| Keywords: | People's Republic of China, General equilibrium modeling, Impact and scenario analysis |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6775&r=cmp |
| By: | Zhu Qianting; Wujing; Wangzheng |
| Abstract: | Using agent-based modeling, this study creates a global carbon trading simulation system, and simulates the global carbon trading market under different scenarioes. To evaluate the effect of quota-based carbon emission permits trading mechanism globally, this article constructs a carbon trading model by using ABS modeling technology, and then develops a global carbon trading system, finally examining the capital flows of carbon trading and its impact on global climate protection. Simulation results shows that :( 1) the results of carbon trading depend on quota allocation. To offset the numerous historic carbon emissions, developed countries such as US would face huge quota deficits in the former scenario. (2) With a decrease in global carbon emission quotas and an increase demand for carbon emissions, the global carbon price will rise in the future.(3) The implementation of carbon trading is helpful for transferring capital mainly from developed countries to developing countries. (4)Under the carbon emission trading process, developed countries will purchase a large number of emissions quotas from developing countries, therefore, the cumulative carbon emissions per capita in developed countries will be still much higher than that in developing countries. (5) In both scenarios, carbon emission trading always increases the global Ramsey utility. |
| Keywords: | China (CN), the US (US), the EU (EU), Japan (JP), the former Soviet Union (FSU), and rest of the world (ROW)., Agent-based modeling, Impact and scenario analysis |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6876&r=cmp |
| By: | Judith Kabajulizi |
| Abstract: | 1. Rationale/Objective Evaluation of healthcare reforms has been an integral part of healthcare system studies. In Uganda the effectiveness of the healthcare reforms that were systematically undertaken since 1992, has been widely studied. The partial equilibrium studies evaluating the reforms have concentrated on the economic impact to the health sector and impacts to the population’s health status. The functioning of the health sector generates cascade effects as it is interlinked with both productive labour supply and other sectors in the economy. The economy-wide impacts of healthcare reforms in Uganda have not been researched. The objective of this study is to assess the economy-wide impacts of changes in policies and strategies for healthcare provision in Uganda. Specifically, the study aims to: i) Present results from a dynamic computable general equilibrium (CGE) model for the Ugandan economy that includes healthcare reform effects. The aim is to represent the interaction of the healthcare system with the rest of the economy and incorporate key features of Uganda’s healthcare system in the model. ii) Present an updated Ugandan social accounting matrix (SAM) with a disaggregated health sector defined by three new accounts: non-government health, government primary health, and government other health. The aim of the enhanced SAM is also to capture health consumption expenditure by multiple households defined by residence and main economic activity (i.e. rural-farming, rural non-farming, urban-farming, urban-non-farming, Kampala-non-farming); and productive health sector labour by skill level (i.e. self-employed, unskilled, skilled). ii) Determine the impact of changes in healthcare policies and strategies on: a) factors of production; b) households; c) non-healthcare sectors; and d) macroeconomic indicators. iv) Assess how policies aimed at improving healthcare delivery compare. 2. Design and methods: The analysis is based on a dynamic computable general equilibrium model of Uganda calibrated to the enhanced Uganda 2007 social accounting matrix. The CGE method of evaluation is a move from the narrow internal focus on the health sector to wider national effects. Additionally, the study is in a developing country setting and hence lessons to draw on the likely macroeconomic impacts of healthcare reforms for low- and middle-income countries generally. 2.1 The Uganda social accounting matrix The Uganda SAM 2007 is a 122 by 122 matrix representing 50 sectors (comprising of agriculture, industry, and services); 6 factors of production (labour, livestock capital, physical capital, and land); and 8 institutions (enterprises, government, multiple households, and the rest of the world). My role in this pre-existing Uganda SAM 2007 is to disaggregate the health sector into three new accounts namely non-government-health, government-primary-health, and government-other-health; and balance the new SAM. While creating the new accounts, aggregate totals from the original SAM are preserved (that is, shares are used from other sources rather than actual numbers). Household health consumption expenditure and health sector labour supply shares are derived from the Uganda national household survey (UNHS) 2005 and the UNHS 2005 labour survey module respectively. Shares for capital and health intermediate inputs are derived from the national accounts and government health expenditure for 2007/2008; government health consumption shares are taken from the government medium term expenditure framework (MTEF) 2006/2007. 2.2 The model The analysis is based on a recursive dynamic model to capture the dynamics of health policy changes in the economy. The Labour force growth rates for the different policy simulations are exogenously supplied from a demographic model. I present two policy scenarios representing exogenous changes in the economic conditions of the country, which are compared to a baseline scenario of business as usual. The base run is for the period 2010-2025 and assumes government budget allocation remains the same throughout the model period. The first simulation considers reallocation of resources to the health sector. Thus, the base year government health expenditure is raised by some percentage (informed by the literature), as a share of GDP. In the second experiment, the reallocation of resources to health sector is coupled with improved efficiency in the use of resources. Thus, I increase health expenditure by some percentage from the base, with increased factor productivity in the health sector (both total factor productivity and health specific factor productivity). 3. Results/Expected Results The creation of three new health accounts (out of the original single account) in the Uganda SAM 2007 is my innovation. Specifically, the health sector is now represented by non-government-health, government-primary-health, and government-other-health. The scenarios described above are a work in progress and final results will be presented in the full conference paper. |
| Keywords: | UGANDA, General equilibrium modeling, Developing countries |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5158&r=cmp |
| By: | Virginie Doumax-Tagliavini; Jean-Marc Philip; Cristina Sarasa |
| Abstract: | The 2009 Renewable Energies Directive (RED) has set up ambitious targets concerning biofuel consumption in the European Union by 2020. Nevertheless, budgetary constraints and growing concerns about the environmental integrity of first-generation biofuels have imposed a phasing out of the fiscal instruments to promote them. Focusing on France, this paper combines an exogenous increase in oil prices and tax policies on fossil fuels. The objective is to determine the efficiency of an alternative incentive scheme for biodiesel consumption based on a higher price of the fossil fuel substitute. Policy simulations are implemented through a dynamic computable general equilibrium (CGE) model calibrated on 2009 French data. The results show that the 10% biodiesel mandate set by the RED would not be achieved even if the fixed taxes on diesel reach the same level as those on gasoline. Although integrating the rise in oil prices into the fiscal framework improves the biodiesel penetration rate, it remains slightly below the target. Moreover, we find that the effects of biofuel consumption are limited to the biofuel chain sectors. In other agricutural sectors, the substitution effect of biodiesel with diesel is partially offset by the pricing effect induced by higher energy production costs. see above See above |
| Keywords: | France, Energy and environmental policy, Energy and environmental policy |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:6245&r=cmp |
| By: | André Lémelin |
| Abstract: | In the vast majority of recursive dynamic CGE models, the savings rate is constant and exogenous. Intertemporal CGE models, by contrast, are solved simultaneously for all periods, and agents optimize intertemporally. But the theoretical consistency of intertemporal optimization is achieved only at the cost of more aggregated, less detailed models, due to computational limitations. In some applications, therefore, recursive dynamics should be preferred to intertemporal dynamics for practical reasons of computability. This paper presents a recursive dynamic CGE model in which households determine their savings rate from intertemporal optimization, by solving a simplified form of their intertemporal problem. This approach we call « truncated rational expectations » (TRE). In the TRE framework, households have rational expectations for the current period and the following one. Accordingly, the model is solved simultaneously for two periods at a time, the current period τ and the following one. Household (rational) expectations for period τ +1 are given by the model solution. For subsequent periods, household expectations are formed by extrapolating from τ and τ +1 solution values, assuming a constant rate of change. The TRE framework is implemented in a modified version of the Decaluwé et al. (2013) PEP-1-t model, and applied to South Africa, using a 2005 SAM by Davies and Thurlow (2011). Several simulations are run, with two variants of the 2005 SAM, the original one and a modified one with a high initial household savings rate. The results are compared with those of a static expectations model with intertemporal optimization, and of a fixed-savings rate model. The main difference is that in the first two models, the household savings rate is not constant, even in the BAU scenario. It is also responsive to changes in the rate of return on assets. On the other hand, an exogenous reduction in household wealth has very little effect. Dans la plupart des modèles dâéquilibre général calculable dynamiques séquentiels, le taux dâépargne est constant et exogène. Les modèles intertemporels, eux, sont résolus simultanément pour toutes les périodes et les agents pratiquent lâoptimisation intertemporelle. Mais la cohérence théorique de lâoptimisation intertemporelle nâest atteinte quâau prix de modèles moins détaillés, à cause de limites sur le volume des calculs. Câest pourquoi, quand le détail des résultats est important, on peut préférer utiliser un modèle dynamique séquentiel. Cet article présente un modèle dâéquilibre général calculable dynamique séquentiel dans lequel les ménages déterminent leur taux dâépargne par lâoptimisation intertemporelle, en résolvant une forme simplifiée de leur problème intertemporel. Câest ce que nous appelons des « anticipations rationnelles tronquées » (TRE). Dans ce cadre, les ménages ont des anticipations rationnelles pour la période courante et la suivante. Le modèle est donc résolu simultanément pour deux périodes à la fois, la courante τ et la suivante. Les anticipations rationnelles des ménages pour la période τ +1 sont données par la solution du modèle. Pour les périodes subséquentes, les anticipations sont formées par extrapolation à partir des valeurs de τ et τ +1, en supposant un taux de changement constant. Lâapproche TRE est implantée dans une version modifiée du modèle PEP-1-t de Decaluwé et al. (2013), au moyen dâune matrice de comptabilité sociale (MCS) de lâAfrique du Sud pour 2005 due à Davies and Thurlow (2011). Différentes simulations sont menées, avec deux variantes de la MCS, lâoriginale et une version modifiée avec un taux élevé dâépargne des ménages. Les résultats sont comparés avec ceux dâun modèle avec anticipations statiques et optimisation intertemporelle, et avec ceux dâun modèle à taux dâépargne fixe. La principale différence observée est que dans les deux premiers modèles, le taux dâépargne des ménages nâest pas constant, même dans le scénario de référence. De plus, il réagit aux variations du taux de rendement des actifs. Par contre, une réduction exogène du stock de richesse des ménage a très peu dâimpact |
| Keywords: | Computable general equilibrium models, recursive dynamic models, intertemporal optimization, household savings , Modèles d’équilibre général calculable, modèles dynamiques séquentiels, optimisation intertemporelle, épargne des ménages |
| Date: | 2014–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2014s-38&r=cmp |
| By: | Virginie Doumax; Jean-Marc Philip; Cristina Sarasa |
| Abstract: | The 2009 Directive on Renewable Energies (called RED) has set up ambitious targets concerning biofuels consumption in the European Union. This paper addresses this issue in the case of France, focusing on alternative tax policies designed to stimulate biofuels consumption. Our main objective is to determine under what circumstances tax policies could help the French government to achieve the 2020 biofuels consumption mandate. A common response is to increase taxes on fossil fuels in order to enhance the price competitiveness of their renewable substitutes on the fuel market. However, recent studies (Timilsina et al., 2011a; Barker et al., 2008; Weber et al., 2005) have shown that the way the government uses the tax revenue is a key determinant. Indeed, recycling the tax revenue to households through a lump-sum rebate is not an efficient strategy since the impact on biofuels consumption is limited, even with higher tax rates. Hovewer, when the tax revenue is used to finance a biofuel subsidy, the market penetration of biofuels increases significantly. On the other hand, some studies underline the role of oil prices in the expansion of biofuels worldwide. Timilsina et al. (2011b) show that if oil prices rise 150% from their 2009 levels by 2020, the resulting penetration of biofuels would be 9%. But they don’t take into account the context of rising oil prices into a tax policy analysis. With these questions in mind, we propose to go further and to combine both features, tax policies and rising oil prices, into a same model. The aim is to determine the minimal level of additional taxes on fossil fuels needed to achieve the 2020 biofuels target when oil prices increase. On the other hand, we take into account the budgetary constraints of the government by eliminating the differential tax rate between fossil fuels and renewable fuels. To do it, we increase the level of the excise-tax on biofuels by 35% in order to observe if the 2020 biofuels target could be also reached under this assumption. For this purpose, we develop a multi-sector, recursive dynamic computable general equilibrium (CGE) model calibrated on 2009 French data. Standard CGE models take into account the various inter-linkages between economic sectors and are particularly useful for the evaluation of tax policies. Our first scenario consists in designing different tax schemes on fossil fuels. We compare the level of additional taxes required to reach the 2020 consumption target when the tax rate increases progressively and when the rise is less graduated. Then, in a second scenario, we wonder which would be the level of taxes on fossil fuels to reach the 2020 consumption target when the excise-tax rate on biofuels is increased. In a third scenario, we combine the precedent simulation with an exogenous increase of oil prices with the assumption that future evolution of oil prices will follow the trend observed on the past period. This paper also investigates the economy-wide effects of these alternative scenarios, notably on the agricultural sector. Indeed, the impacts of a larger expansion of biofuels may increase the agricultural outputs, while an exogenous increase of oil prices may lead to an output drop. Finally, we introduce explicitly biofuels by-products in the analysis, notably oilseed meals, in order to check if their presence reduces the price impacts of the biofuel production. Indeed, recent studies (for e.g. Taheripour et al., 2010) have shown that the presence of by-products could mitigate the price impacts of biofuel production. Results of scenarios 1 and 2 suggest that the target could be achieved with acceptable levels of taxation. Nevertheless, scenario 2 implies higher tax rates on fossil fuels and larger but limited welfare losses. The needed level of additional taxes is lower when it is analyzed in a context of rising oil prices, as it was expected. Besides, we find that the development of biofuel consumption only partially offsets the depressive effect of oil prices on the agricultural output. The introduction in the model of biofuels by-prducts reveals smaller changes in agricultural prices, particularly in the livestock sector, confirming that models that omit by-products may overstate the economic impacts of biofuels mandates. |
| Keywords: | The model concerns the French national economy., Energy and environmental policy, Agricultural issues |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5417&r=cmp |
| By: | Willi Semmler; Lars Grüne; Marleen Stieler |
| Abstract: | This paper presents a new approach to solve dynamic decision models in economics. The proposed procedure, called Nonlinear Model Predictive Control (NMPC), relies on the iterative solution of optimal control problems on finite time horizons and is well established in engineering applications for stabilization and tracking problems. Only quite recently, extensions to more general optimal control problems including those appearing in economic applications have been investigated. Like Dynamic Programming (DP), NMPC does not rely on linearization techniques but uses the full nonlinear model and in this sense provides a global solution to the problem. However, unlike DP, NMPC only computes one optimal trajectory at a time, thus avoids to grid the state space and for this reason the computational demand grows much more moderate than for DP. In this paper we explain the basic idea of NMPC together with some implementational details and illustrate its ability to solve dynamic decision problems in economics by means of numerical simulations for various examples, including stochastic problems, models with multiple equilibria and regime switches in the dynamics. See above See above |
| Keywords: | NA, Modeling: new developments, Modeling: new developments |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5782&r=cmp |
| By: | Raouf Radouane |
| Abstract: | In this paper, we will try to analyze the impact of offshoring on employment in France. In economic analysis, is often associated the phenomenon of relocation to the problem of unemployment. Using a computable general equilibrium model (CGE), we simulate the relationship between offshoring to the CEECs and the rising inequality between skilled and unskilled workers in France. In order to study this impact, we will initially talk about theoretical and empirical contributions explaining the relation “relocation-employment”. In a second step, we will develop a CGE model for the case of France to test the impact of offshoring to the CEECs, on wage and unemployment rate for skilled and unskilled workers. The simulation in this model, in a prospective sense, through the increase in outward FDI destination in the CEECs that are considered as relocation. Wage of Skilled will improve and rate of unemployement of unskilled will also increase. |
| Keywords: | France/ CEECs, General equilibrium modeling, EU enlargement |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5288&r=cmp |
| By: | Michael Lokshin (Development Economics Research Group, The World Bank); Sergiy Radyakin (Development Economics Research Group, The World Bank) |
| Abstract: | A number of complex tasks frequently challenge the computational resources in the areas of simulation modeling and estimation. Often these tasks have a distinct number of separable iterations that can be performed in parallel simultaneously and independently from each other. Earlier approaches were limited to an execution on a single machine (e.g., PARALLEL, 2013) in parallel sessions. We are developing a system, which can be run in an MS Windows network, with automatic registration and deregistration of computing nodes (each running Stata), task scheduler, and results aggregator. Multiple machine networked approach allows greater scale and ultimately higher performance. |
| Date: | 2014–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:boc:scon14:5&r=cmp |
| By: | Virginie Doumax-Tagliavini; Cristina Sarasa, University of Zaragoza |
| Abstract: | In September 2013, the EU Parliament has called for a 6% limitation of crop-based biofuels (instead of 10% initially) and proposed a 2.5% binding incorporation target for cellulosic biofuels by 2020. In spite of this stated objective, the horizon of a large-scale adoption for advanced biofuels remains largely uncertain. Indeed, biofuels competitiveness is tightly linked to crude oil prices that also follow an uncertain evolution. In this context, including both uncertainties into the same analysis framework could be challenging. Focusing on France, this work proposes to address this issue. The main objective is to assess the economic and environmental impacts of first and second-generation biofuels. We also determine the conditions under which advanced biofuels could become available earlier regarding to the evolution of oil prices and public subsidies. We develop an original approach to incorporate uncertainty within a dynamic computable general equilibrium (CGE) model calibrated on 2009 French data. In line with the existing literature, cellulosic biofuels are modeled as latent technology (Reilly and Paltsev, 2007; Melillo et al., 2009) and biofuels by-products are included into the analysis (Taheripour et al., 2010). Using stochastic programming, we consider different scenarios depending on the oil price volatility and the changes in the fiscal incentives. This methodology allows us to compare the effects of first and second-generation biofuels as regards mainly agricultural land, food production and greenhouse gas (GHG) emissions. Results confirm the larger performance of advanced biofuels in terms of GHG emissions. They also show in which measure the technology improvement may reduce the pressure on food and land resources. Therefore, simulations provide guidelines for public deciders to design alternative fiscal policies to support advanced biofuels hand in hand with economic, social and environmental impacts. |
| Keywords: | France, General equilibrium modeling, Energy and environmental policy |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6941&r=cmp |
| By: | Cristina Sarasa; Jean-Marc Philip; Julio Sánchez-Chóliz |
| Abstract: | In last years, policy demand for information about the economic consequences of water management has increased significantly. It is due to the interaction between the hydrological and economic realm works both ways: water is transformed for economic use and the impact of economic use on water availability and quality consequently has implications in both the short and long term for the transformation process to modify water for economic use (Brower and Hofkes, 2008). From literature, it is demanded additional analysis on policy interventions that could provide an incentive for adaptation responses to climate change (Dinar, 2012). Policy strategies could mitigate the longer-term economic effects of environmental change. In this line, the main purpose of this work is to find a tax policy strategy to apply to water management that lets mitigate the economic-wide impacts of water constraints, specifically in drought years, through an improvement in water efficiency in the long term. To do it, we use the methodological approach of a dynamic computable general equilibrium model (CGE). These models take into account the various inter-linkages between economic sectors and are particularly useful for the evaluation of water pricing policies (Brower and Hofkes, 2008). Therefore, an additional objective of this paper is to contribute to a growing literature that uses CGE models as a tool for the analysis of water management due to the majority of the studies are usually focused on energy and climate change. Since the challenge of water is a long-term matter, dynamic CGE models can help us to analyze water management with a view of the future economic impacts. These models present a wide range of possibilities that lead us to compare the economic impacts between a standard neoclassical CGE model with the ones of a model following a structuralist approach (Taylor, 1990). On the other hand, specific water basin models can help to evaluate and predict the impact of policy interventions on both economic and water systems (Brower et al., 2008). With these questions in mind, we examine the economic impacts from different alternative policies in a Spanish region which is dominated by a relevant irrigation scheme. The Ebro River Basin is the Spain´s largest river basin, occupying 17 per cent of its territory. Within the Ebro River basin, the irrigation of the province of Huesca has over 200,000 hectares, representing almost 40% of the utilised agricultural area (UAA) of Huesca and the 6% of the agricultural irrigated farmland in Spain (MARM, 2010). The output generated by the irrigation of Huesca reaches over 80% of total agricultural production in the province (DGA, 2009). The rationale for choosing the province of Huesca in Spain is based on various aspects. First, the major irrigation scheme of Spain is located in this area, which covers over 127,000 hectares, in particular, the Upper Aragon Irrigation System (CGRAA in Spanish acronyms) which includes 58 irrigation communities. This irrigation scheme also supplies water to several towns and cities, as well as ten industrial estates, and it is highly representative of irrigation in the Ebro valley. Second, the ready availability of data and collaboration in previous studies with this scheme has provide relevant information on water uses, levels of efficiency, cropping patterns and crop yields from 2001 to 2010, that mean that the CGRAA is ideally suited for the purposes of this study. In recent years, this irrigation scheme faces with a downward trend of water supply and some restrictions in water resource availability due to among other reasons the revegetation of headwaters, see Bielsa et al. (2011), the effects of climate change and the lack of regulation in this irrigation scheme. The current levels of water use efficiency in this irrigation scheme are very significant and suppose an efficient use, although it could be improved. They represent a great leap if we compare with the situation three or four decades ago. However, the volume of water supply in some years is insufficient for crops such as corn, rice, alfalfa or fruits, which are the most profitable and with high interest for agri-food industry, livestock and imports. These water constraints are provoking shocking changes in the cropping pattern removing towards less water demanding crops and with lower profitability, instead of the expected evolution (more weight of fruits, vegetables, corn,...). Finally, the water situation in this irrigation scheme could be a reflection on the situation in other arid areas with water constraints or with a downward trend in the volume of water available in the last years. In these areas the introduction of the most profitable and demanding crops could be really limited by the lack and insecurity of water supply. This water situation is represented into a recursive dynamic computable general equilibrium model that is developed with different structures and used for policy simulations. It is a multi-sector model in which water is also considered as a production factor. In this paper, we evaluate the economic impacts of alternative assumptions applied to different tax policies that combine both exogenous and endogenous technological change. First, the results are presented with a standard CGE model in a steady state reference scenario with a 2030 time horizon. A second scenario takes into account the real evolution of water supply in the last years in this area. This forecast is based on a downward trend of water supply and water constraints that lead to water productivity losses in drought years. Keeping the use of a standard walrasian CGE model, this scenario shows that future droughts will drastically influence on the prices of water. In a third scenario, we include in the model a structuralist approach in which water prices are under control to assess the economic impacts of tax policies designed to stabilize the price of water and as a consequence, to smooth the economic-wide impacts in drought years. In a fourth scenario under a standard walrasian approach again, we simulate a tax policy designed to increase water efficiency through endogenous technological change. The level of water efficiency follows a Gompertz function that starts from the real initial value, increases gradually and finally is stabilized with time. In addition, we wonder what could be the level and type of taxes that is needed to increase water efficiency. We focus our analyze on the substitution in production and consumption at the sectoral level to observe the effects of the reallocation of water. Our results show that letting only market laws functioning without a strong policy strategy would be not enough for goods such as water, especially in the long run. |
| Keywords: | Spain, General equilibrium modeling, Energy and environmental policy |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5349&r=cmp |
| By: | Anda Nugroho; Rita Helbra Tenrini |
| Abstract: | A large portion of the Indonesian population is entering the middle-class as its economy is growing rapidly. Nielsen, a leading media research said that currently, middle class in Indonesia is the third-largest in the world. There are about 74 million middle classes in Indonesia, and this number will double by 2020. In the other hand, economic growth also creates a problem of rising inequality. Inequality in Indonesia is worsened as the Gini index increasing from 0.308 in 1999 to 0,41 in 2011. Both conditions, rising middle class and increasing inequalities create a challenge for policy maker to design optimal Personal Income Tax (PIT) system that can capture the tax potential from middle class growth and at the meantime improving the inequality. In developing countries like Indonesia the tax system has been aimed at increasing government revenues as for the past 10 years, the personal income tax revenue has increased from 19,5 trillion rupiah in 2002 to 83,3 trillion rupiah in 2012. More than that, the income tax is also supposed to be used as a public policy instrument to alter after-tax income distribution. The purpose of this paper is to design a personal income tax system that can capture the increase in tax potential as the middle class growth and also promote better income distribution in Indonesia. Using microsimulaiton and Computable General Equilibrium (CGE) approach, we quantitatively analyze the way proposed PIT system affect government revenue and alter the inequality of the income distribution. First, we propose some PIT systems and quantify the way they affect after tax income by using the micro data. Next, we employ CGE model and execute the simulation to calculate the effect of proposed PIT systems on the Indonesian economy. We use Indofiscal (2011), a CGE model of the Indonesian economy with a focus on fiscal policy. The model has capability of evaluating a range of fiscal policy, including personal income taxes. The research seeks to design a personal income tax system that can capture the increase in tax potential as the middle class growth and also promote better income distribution in Indonesia. The result will help the policy makers to design a better income tax system in responding to the current situation of middle income growth and rising inequality. |
| Keywords: | Indonesia, Tax policy, Impact and scenario analysis |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:7017&r=cmp |
| By: | Ole Boysen |
| Abstract: | The repeated occurrence of high food price spells has started intensive research on the impacts of these events on income distribution and poverty, in particular. Initial empirical work attempting to assess the poverty impacts used first-order analysis using household data that differentiates between net buyers and net sellers of food (e.g., Ivanic and Martin, 2008; Wodon et al., 2008; Zezza et al., 2008; Aksoy and Isik-Dikmelik, 2008; and on Uganda: Benson et al., 2008; Simler, 2010). One common feature as well as a major critique of such analyses is that they disregard the second-order impacts of the price changes on both the supply and consumption sides (see, e.g., Aksoy and Hoekman, 2010). The objective of the present study is to quantify the effect of this neglect on the consumption side. More specifically, the aim of this study is twofold. First, to provide an indication whether it is worthwhile to invest in the estimation of a demand system for similar consumption side poverty impact analyses. Second, to provide a sense of the magnitude in the loss of fidelity in using a less flexible instead of a more flexible demand system within computable general equilibrium analyses of poverty impacts. As the basis of this study, a 13-item censored Quadratic Almost Ideal Demand System (QUAIDS) is estimated over data of the Uganda 2005/2006 National Household Survey (UNHS) which covers a representative set of 7426 households. The estimated parameters are used to simulate the impact of the 2007/2008 and 2011 food price spikes on poverty. The shocks are calculated from price time series data for several food commodities and Ugandan market locations which are matched to the households of UNHS. As the Linear Expenditure System (LES) is one of the most popular demand systems used in computable general equilibrium models, a LES is calibrated, for each household separately, to approximate the QUAIDS elasticities in the point of the base data as done in Yu et al. (2003). Then, the non-behavioural first-order poverty impacts as well as the behavioral poverty impacts employing the two demand systems are simulated. The demand system simulations are conducted fixing the base-period utility and calculating the compensating variation based on an algorithm due to Vartia (1983). To date, the estimation of the 13-item censored QUAIDS has been completed and the Vartia algorithm for the simulations has been implemented. We expect that for large price shocks, such as the 2007/2008 and 2011 price spikes, the use of a behavioural demand model will dampen the negative effects on consumption significantly. Nevertheless, it is difficult to conceive what impact the choice between the QUAIDS and the LES will have on the results. The results from this study will: First, provide an indication whether it is worthwhile to invest in the estimation of a demand system for similar consumption side poverty impact analyses. Second, provide a sense of the magnitude in loss of fidelity in using a LES instead of a more flexible demand system like the QUAIDS within CGE model analyses of equivalent price shocks. |
| Keywords: | Uganda, Impact and scenario analysis, Developing countries |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5438&r=cmp |
| By: | Ayele Gelan |
| Abstract: | Electricity users in Kuwait pay a nominal tariff of 2 fills (about USD 0.007) per KWh. Almost all cost of generation, distribution and supply are covered by a very generous government subsidy. The 2 fills/KWh was introduced in 1966 and has been retained at that level since then. On the other hand, the cost of generating electricity has sharping risen particularly in recent years. For instance, cost per KWh escalated from about 20 fills in 2000 to about 40 fills in 2010, indicating that cost of production nearly doubled during that decade. The extremely generous subsidy or almost free availability of electricity has given rise to a pattern unsustainable behaviour in electricity use. Krane (2012) expressed the situation as a ‘dichotomy between energy value and price’ to say that excessively low energy pricing induced ‘wanton consumption’ whereby ‘low pricing encourages consumption at rates above those warranted by the opportunity cost of these fuels on global energy markets. Low prices also distort energy allocation preferences while undercutting upstream investment and efficiency incentives’ . These are reflected in a number of key aggregate indicators. For instance, in terms of economic electricity use efficiency, measured in terms of GDP generated per unit of KWh used, Kuwait does not only stand among the lowest but also the situation has gotten worse over the years. In 1990 GDP/KWh was USD 1.4 but it fell to USD1.2 in 2005. This contrasts with experiences of most other countries in the world; for instance, USA which was doing already much better in 1990 (about USD 2.2/KWh) but also electricity use efficiency improved and reached about USD2.7 in 2005. In terms of electricity consumption per capita Kuwait is the second highest in 2005 (after Norway). This figure doubled between 1985 and 2005, rising from about 8 thousands KWh to 17 thousand KWh. It should be noted that while Kuwait’s electricity is generated entirely by using fossil fuels but other countries like Norway have shifted to renewables such as hydro sources. The objective of this study is to quantify economy-wide impacts of public utility reform that may target to start by reducing electricity subsidy. The study is timely and highly relevant to current policy developments in the country. It will inform the ongoing debate regarding far reaching economic reform programmes, mainly aiming at diversification of Kuwait’s economy away from heavy reliance on the oil sector and reducing the dominance of the public sector by promoting private sector developments. Approaches and Methods The study was conducted using a computable general equilibrium (CGE) modelling approach. This was based on a social accounting matrix constructed for Kuwait based base year data of 2010. The 2010 Kuwait input-output table and related system of national accounts provided by the Central Statistical Bureau (CSB) provided core data required to construct a SAM with 17 production sectors. This was supplemented with other satellite accounts such as employment, demographic and capital stock which are separately estimated in line with flow variables in the SAM. The CGE model used for this study is the comparative static version of the standard IFPRI CGE model (Lofgren, et al, 2001), which was substantially revised to customize it to the purpose of this study . While designing the simulation experiments, the focus of this study was on labour market conditions to capture the highly segmented nature of the labour market in Kuwait. Expatriates constitute the bulk of the work force in Kuwait, about 83%. Kuwaiti’s account for the remaining proportion. Critically, the national labour force are highly concentrated in the public sector, including the electricity sector. The average wage level for Kuwaiti’s is substantially higher than expatriate salaries and wages. These conditions are highly relevant in the context of this study. Economic reform in Kuwait is bound to be implemented in conditions of inflexible wages and limited sectoral mobility among the Kuwaitis. However, labour market conditions for the expatriates is likely to be flexible wages and free mobility between sectors. Simulation experiments were conducted by taking these conditions into account. Preliminary Simulation Results Two scenarios of simulation experiments were conducted. These are separately discussed below. Scenario 1: 25% reduction of subsidy on the electricity sector To begin with the intra-sectoral impacts, gross value-added in the electricity sector falls by 34% while electricity tariff rises 260%, which means a rise from 2 fills/KWh to 5.2 fills/KWh. The policy shock reveals interesting macroeconomic and sectoral impacts. The inter-sectoral effects are more or less in line with an inverse proportion with sectoral electricity use intensity – more intensive users experiencing a degree of contraction while less intensive electricity users experiencing some expansions. The mixed impacts at sectoral levels have led to negligible macroeconomic effects. Aggregate GDP (value-added measure) declining by a less than 1% while gross domestic expenditure marginally increased, by about 1%. As we expect government surplus increases by about 3%. Household welfare, measured in terms of equivalent variation, declined but only by 0.5%. In this modelling framework, the net impacts of this policy shock are negligible but distributional impacts are likely to be much higher. We have shown this in terms of distributional effects across sectors but distributional effects across the households is beyond the scope of this research, since this study is based on a highly aggregate SAM which does not distinguish between households by income or expenditure sizes. This are left for future research. Scenario 2: 25% reduction of subsidy on the electricity sector accompanied by household compensation for welfare loss This scenario was conducted aiming at compensating households for the welfare loss they experienced due to the policy shock. It should be noted that the reduction in welfare reported above is negligible. However, if the subsidy reduction was much larger, say 50% or more, then we would expect that the welfare loss to households will be much larger. We have noted that the policy shock will also further increase Kuwaiti government budget surplus. However, unlike other countries with large budget deficits, current economic reforms in Kuwait are motivated more by the need to adjust the structure of the economy and improve efficient resource allocation rather than budgetary considerations. In that context, if the economic reform can help with achieving the main objective of effecting efficient resource allocation, then compensating households for welfare loss may be necessary particularly to reduce public resistance to expected rationalizations of public utilities including the electricity sector. It was with these policy context in mind that the scenario 2 policy experiment was conducted. The additional simulation shock was effected by compensating households by full amount of budget surplus gained by the government as a result of the policy change. In other words, government transfer to households was scaled up by the full amount of the difference between government budget surplus with the policy shock in scenario 1 and the corresponding figure in the base year. This yielded a much higher expansionary effect. In scenario 2, the only sector that experience contraction in terms of gross value added is the electricity sector, the sector that received the shock, but it contracts by about 32%, which is smaller than the contraction it experienced in scenario 1. The rates of positive stimulus to the other sectors ranged from 0.41% in government services to 6% in the construction sector. Aggregate GDP increased by 2.2% and the compensation caused household welfare to improve by 3.4% compared to the pre-reform level. |
| Keywords: | Kuwait, Energy and environmental policy, General equilibrium modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:7106&r=cmp |
| By: | Dirk Willenbockel; Abeer Elshennawy; Sherman Robinson |
| Abstract: | Due to the high concentration of economic activity along the low-lying coastal zone of the Nile delta and its dependence on Nile river streamflow, Egypt's economy is highly exposed to adverse climate change. Adaptation planning requires a forward-lookingn assessment of climate change impacts on economic performance at economy-wide and sectoral level and a cost-benefit assessment of conceivable adaptation investment. The study aims to demonstrate the usefulness of an intertemporal computable general equilibrium modelling approach for such an assessment. This study develops a multisectoral intertemporal general equilibrium model with forward-looking agents, population growth and technical progress to analyse the long-run growth prospects of Egypt in a changing climate. Based on a review of existing estimates of climate change impacts on agricultural productivity, labor productivity and the potential losses due to sea-level rise for the country, the model is used to simulate the effects of climate change on aggregate consumption, investment and welfare up to 2050. Available cost estimates for adaptation investments are employed to explore adaptation strategies. On the methodological side, the present study overcomes the limitations of existing recursive-dynamic computable general models for climate change impact analysis by incorporating forward-looking expectations. Moreover, it extends the existing family of discrete-time intertemporal computable general equilibrium models to which our model belongs by incorporating population growth and technical progress. On the empirical side, the model is calibrated to a social accounting matrix that reflects the observed current structure of the Egyptian economy, and the climate change impact and adaptation scenarios are informed by a close review existing quantitative estimates for the size order of impacts and the costs of adaptation measures. The simulation analysis suggests that in the absence of policy-led adaptation investments, real GDP towards the middle of the century will be nearly 10 percent lower than in a hypothetical baseline without climate change. A combination of adaptation measures, that include coastal protection investments for vulnerable sections along the low-lying Nile delta, support for changes in crop management practices and investments to raise irrigation efficiency, could reduce the GDP loss in 2050 to around 4 percent. |
| Keywords: | Egypt, Impact and scenario analysis, General equilibrium modeling |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5325&r=cmp |
| By: | Yingying Lu; David Stern |
| Abstract: | The degree of substitutability assumed between inputs in production and commodities in consumption is one of the key factors that might affect the range of predicted climate mitigation costs. We explore how and by how much assumptions about elasticities of substitution affect estimates of the cost of emissions reduction policies in computable general equilibrium (CGE) models.We use G-Cubed, an intertemporal CGE model, to carry out a sensitivity analysis and apply factor decomposition analysis to the outcomes from the model.The results suggest that the average abatement cost rises non-linearly as elasticities are reduced. Substitution elasticities between capital, labor, energy, and materials in production have a larger impact on mitigation costs than inter-fuel substitution does. There are notable differences in the effect of the elasticities on costs at the regional level due to interactions in international trade and capital flows in such a global model. As elasticities are reduced, growth in GDP and emissions also decrease under the business as usual scenario and so the emissions that must be cut to reach a given absolute mitigation target are also reduced. Therefore, there is not much variation in the total costs of reaching a given target across the parameter space. |
| Keywords: | Global, General equilibrium modeling, Energy and environmental policy |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6692&r=cmp |
| By: | Roberto Roson; Kazuhiko Oyamada |
| Abstract: | The aim of this work is analyzing the practical relevance, from a qualitative perspective, of a new methodology which is intended to include firm heterogeneity, as modeled by Melitz (2003), in computable general equilibrium effects. We assess to what extent the inclusion of industries with heterogeneous firms in a CGE framework does not simply make the Melitz model “operational”, but allows accounting for structural effects that may significantly affect the nature, meaning and implications of the model results.We develop two applied models, which are calibrated with the same data set. A first "simple" model is based on the original Melitz specification, with one sector, one primary factor, and two regions. A second model includes a full fledged general equilibrium structure, with two industries and two primary factors. Furthermore, fixed costs in heterogenous industries are related to demand for services. We carry out the same simulation exercise, a classic lowering of trade costs, with the two models. We contrast the models results, highlighting any possible qualitative difference. Finally, we trace back any divergence in terms of differences in the structure of the two models.The typical experiment of lowering trade barriers, leading to firm selection and aggregate productivity gains in Melitz (2003), now also triggers a reallocation of production among industries and a change in relative returns of primary factors, as it is typical in multi-sectoral general equilibrium models. An increase in the number of exporting firms, for instance, generates an additional demand for services in both the origin and destination countries, because of variable and fixed trade costs. |
| Keywords: | N/A, Modeling: new developments, General equilibrium modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6669&r=cmp |
| By: | Justine Nannyonjo; Wilson Asiimwe |
| Abstract: | The East African Community member states of Kenya, Uganda, Tanzania. Rwanda and Burundi have over the years, established closer economic links through a Free Trade Area, a Customs Union, and a Common Market. These efforts have led to a deeper regional integration and trade within the EAC and have contributed to East Africa’s overall fast growth. Given the progress with intra-regional trade, the objective of the EAC countries is establishment of the East African Monetary Union (EAMU), with the circulation of the single currency in 2021. The establishment of the EAMU has gained momentum with the signing of the EAMU Protocol in November 2013. Successful implementation of the proposed monetary union would yield several economic and social benefits including promotion of trade through the enhancement of the payments system for goods and services in the region; creation of a larger regional market and broadening of business and trade-related income earning opportunities for the sub-region; and promotion of competitiveness and efficiency in production leading to increased Gross Domestic Product (GDP). However, there are also costs linked to the unification, including loss of national autonomy in the monetary policy, possibility of increased inflation and unemployment, loss of exchange policy and fiscal independence (Schuberth and Wehinger, 1998; Bean, 1992; Calmfors, 2001). The magnitude of this loss depends on how well individual countries were conducting monetary policy prior to joining the currency union. But in order to reap the maximum benefits and minimize costs, there ought to be a sufficient degree of macro-economic convergence, and financial integration among the aspiring economies preceding the union. Thus the EAC countries have put in place macro convergence criteria to be met by the each country prior to entry into the monetary union. These have included three phases: first phase (2007-2010), second phase (2011-2014); which was revised in 2013 and to be achieved within period of eight years (2013-20). The revised performance convergence criteria which each of the EAC countries must achieve are the following macroeconomic status: (a) headline inflation of no more than 8%; (b) fiscal deficit, including grants of no more than 3% of GDP; (c) gross public debt of no more than 50% of GDP in Net Present Value terms; and (d) maintenance of official foreign reserves of at 4.5 months of imports. But how far the nations will progress in aligning their economies to the set bench marks remains a question given the discrepancies in institutional mechanisms, social and economic structures. The prospective impact of (i.e. macroeconomic, sectoral and welfare effects) of the macroeconomic convergence criteria on the economies have also not been ascertained. For example, what would be the impact of adjustment of fiscal policy to meet the thresholds in the convergence criteria on GDP, sectoral performance and house welfare? Which mixture of fiscal policy adjustment (i.e. what percentage change in capital and/or recurrent expenditure) would maximize benefits for the economies? Therefore, the above issues call for a careful assessment of the prospective impacts of the macroeconomic convergence criteria on the economies. Objectives of the study The study aims to assess the prospective impact of the macroeconomic convergence criteria on the Ugandan economy. The specific objectives are: i. To critically examine the prospects of Uganda achieving the macroeconomic convergence criteria. ii. To assess the prospective macroeconomic, sectoral and welfare effects of the macroeconomic convergence criteria on the Ugandan economy. iii. To draws policy implications for achieving the convergence criteria. This paper addresses the above objectives using a Dynamic CGE Model. The data is obtained from the 2009/10 Social Accounting Matrix. The model is composed of the behavior of households, investors, industries, government and exporters that are based on the theoretical structure of the ORANI-G model (Dixon et al., 1982). Dynamic equations are extracted from ORANIGRD model to produce a Recursive Dynamic (forecasting) model. The dynamic equations are used to derive the capital accumulation and investment allocation as well as real wage and employment adjustment mechanisms. Households are assumed to maximize utility whereas firms minimize costs subject to input prices. Domestic and imported commodities are assumed to be imperfect substitutes and are combined using a constant elasticity of substitution (CES). Production for domestic market and export is captured using the Constant Elasticity of Transformation (CET). Additional variables and behavioral and/or identity equations are included in this model to capture the additional data from the Social Accounting Matrix (SAM). Simulation design The convergence simulation hinges on the adjustment of the fiscal policy to meet the thresholds in the EAC macroeconomic convergence criteria. Given that the debt sustainability analysis (DSA) for FY 2013/14 reveals that Uganda external debt is highly sustainable, the simulation mainly focuses on meeting the thresholds on inflation (8 %) and fiscal deficit as a percentage to GDP (3 %). The simulation is developed in such a way that, fiscal policy is expanded until the EAC thresholds are met. Two simulations are developed including a) Simulation in which both government development and recurrent expenditures are equally shocked with the same percentage expansion, b) In simulation 2 we shock fiscal policy in proportions of 60:40, for development and recurrent expenditure. The paper analyzes the prospective macroeconomic, sectoral and welfare effects of the East African Community macroeconomic convergence criteria, on the Ugandan economy using a Dynamic CGE model. The results indicate that the impact of the convergence criteria is positive on the aggregate demand throughout the simulation period, mainly attributed to strong performance in government and private consumption. FY 2014/15 the consumer prices would increase by 2.84 percent higher than it would be without the EAC convergence criteria. This positive deviation would break in FY 2018/19 to -1.23% less than it would be without the EAC convergence. The key drivers for the consumer prices are for sectors whose investment follows government investment and have government as the biggest consumer of their products including social sectors. Achieving the convergence criteria would lead to a deterioration of the competiveness of the Ugandan exports in the medium term, but lead to improvement of Uganda’s competiveness in the export market in long run, as fiscal policy subsides and external debt forex inflows reduce. While achieving the convergence criteria targets, the growth in government revenue (mainly indirect taxes) would be outstripped by fiscal expansion and this leads to an increase in the fiscal deficit thus having negative implications for debt sustainability. As regards to sectoral performance, sectors whose investment is not mainly driven by profit but follow aggregate investment are those that would perform much better compared to the rest of the sectors. Sectors producing traded goods would be the most negatively affected, mainly due to their loss of competitiveness in the external market. Fiscal policy adjustments post a positive effect on household income throughout the simulation period, mainly due to an increase in increase in nominal wage and transfers to households. However, this improvement can only be sustained in the medium term but collapses in the long run as the EAC macroeconomic thresholds are reached. In the long-run debt accumulates and fiscal deficit percentage to GDP hits the threshold of 3%, fiscal policy is forced to contract to keep within the EAC Macroeconomic criteria. Similarly, household savings would improve in the medium term but deteriorate in the long term, due to the unsustainable household consumption patterns. This simulation reveals that to improve national savings, there is a need to enhance factor payments and employment as well as creating a good macroeconomic environment to enable profitable international transactions. The results justify the existence of the impossible macroeconomic trinity. That is, it’s not possible to have low fiscal deficit, low inflation and a sustainable high growth at the same time. For the economy to clear, one of these aggregates must be compromised to attain the two. For instance, if the high economic growth is to be attained, inflation and deficit need to be allowed to adjust upwards by expanding the fiscal space. However, GDP would grow faster if the fiscal space is focused on the government investment. This would improve technical and production efficiency in the economy as well as sustaining a low inflation as shown in Table 5 above. Since government investment has a mild impact on inflation, this would generate more fiscal space than when the fiscal policy in geared towards recurrent expenditure. In addition, the speed of expansion of the fiscal policy determines the nature of the sectoral impacts. If government spending rises quickly to exhaust the fiscal space created as seen above, aggregate demand outstrips the supply capacity for non traded goods. This generates a construction boom with increasing construction and falling quality. The results also postulate that faster fiscal policy expansion would have a negative impact on Uganda’s competiveness through appreciating the real exchange rate and speedy improvements in the terms of trade. The best economic results would be attained by a gradual fiscal policy expansion mainly focusing infrastructure (investment). |
| Keywords: | Uganda, General equilibrium modeling, Impact and scenario analysis |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:7143&r=cmp |
| By: | Miriam Frey |
| Abstract: | This paper analyzes the effects of the planned free trade agreement (FTA) between the European Union (EU) and Ukraine on inequality and poverty in the latter using a CGE-microsimulation model for Ukraine. Special attention is thereby given to the in-house production of agricultural and processed food goods generated by the Ukrainian households. Due to a lack of information on these activities in the national accounts data, this type of household production is neglected in an already existing CGE analysis of the welfare effects resulting from the EU-Ukraine FTA. However, in-house production of food products for own consumption plays a crucial role in Ukraine. According to a household expenditure survey for Ukraine 60.5% of the households are engaged in the production of agricultural goods like potatoes, eggs and cabbage and an even slightly higher percentage (61.6%) of them reported to produce processed food goods like dairy products and preserves. The CGE-microsimulation model used in this paper follows the top-down approach, meaning that variables, such as prices and factor returns which change as a result of the simulation of the trade integration in the CGE model are then transferred to the microsimulation model where they are treated as exogenous variables. The CGE model used here is a rather standard, small open economy, single-country model for Ukraine exhibiting perfect competition and constant returns to scale. It incorporates 38 sectors of production and a representative household which is disaggregated into four types according to the domestic poverty line and the place of residence (rural or urban). Labor is differentiated based on the level of education in skilled and unskilled labor and is assumed to be fully employed. The microsimulation model consists of a log-income and a discrete choice labor supply equation as well as of accounting identity and arithmetical computation equations. In-house production of agricultural and processed food products is not treated as being part of the – in most of the literature existing – labor market alternative “being self-employed”, but is modeled explicitly and analogous to the labor status as a discrete choice. This is mainly done for the following two reasons. Labor market status is assumed to be a choice made on the individual level, whereas the decision whether or not to participate in household production of agricultural and processed food goods for own consumption is made on the household level. The second reason is that the explanatory variables which influence the choice of the labor market alternative do not necessarily have to coincide with the ones that determine the decision on in-house production of food products. The data needed for the CGE model include the Ukrainian national accounts and input-output tables for 2007, additional statistics from national sources like information on indirect taxes, labor remuneration and tariffs, international trade statistics and a household expenditure survey for 2007 covering more than 10,000 Ukrainian households and more than 20,000 household members. The latter is also the basis for the microsimulation model. Concerning the household level, information on expenditures, place of residence, characteristics of the household head and land ownership are the most important variables. With respect to the household members, information on sex, age, education, labor market status and income are crucial. |
| Keywords: | Ukraine, Trade issues, General equilibrium modeling |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5587&r=cmp |
| By: | Chanyoung Hong; Jung In Yeon; Jeong-Dong Lee |
| Abstract: | Research and development (R&D) is regarded as a core factor which decides the productivity of a firm in the analysis of modern industrial economics. But the R&D behavior and the consequent effect are observed to be different depending on the firm size and industry belonging. Despite the tendency to show less amount in its expenditure, R&D of small and medium enterprises (SMEs) is important because SMEs occupy major part in the number of firms and employees of a nation. This research analyzes the effect of R&D subsidy for SMEs across industry and national economy. In order to achieve the purpose, macroeconomic model of computable general equilibrium (CGE) is used. The typical form of CGE model is modified into knowledge-based one which has additional accounts and equations to incorporate R&D-related factors. Furthermore, social accounting matrix (SAM) in the model differentiates between SMEs and large firms in each industry. The simulation results are expected to show us that R&D in SMEs causes different effects and implications on various sides such as employment, knowledge stock and GDP growth. For example, subsidy for SMEs may not be relatively effective for GDP growth, but it may cause more increase in employment. |
| Keywords: | South Korea, General equilibrium modeling, Public finance |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6846&r=cmp |
| By: | Djoni Hartono; Tony Irawan; Ahmad Komarulzaman |
| Abstract: | To be completed To be completed To be completed |
| Keywords: | Indonesia, Energy and environmental policy, General equilibrium modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:7344&r=cmp |
| By: | Motaz Khorshid; Asaad El- Sadek |
| Abstract: | Since January revolution of 2011, Egypt is witnessing a slowdown of its economic growth, a drop in domestic and foreign direct investments, a considerable decline in industrial production, a notable deterioration in foreign reserves and a growing government deficit. To overcome these unfavorable effects of the post revolution transition period, the Egyptian government decided to formulate a 10-year socioeconomic development plan (2011-12- 2021-22). To support the post revolution development planning process, an extended dynamic economy wide model is constructed and implemented. The model is designed to capture on the one hand, the behavior of the economy wide variables during the recovery period of the economy and to project on the other hand, its growth prospects up to 2021-22. The purposes of the paper are: (i) to assess the current status of the Egyptian economy and its post revolution performance., (ii) to briefly describe the accounting framework, economic rationale and mathematical structure of the dynamic economy wide model, and (iii) to outline the main findings of using the model to carry out goal seeking analysis . The paper is organized around five sections. After an introductory part, the second section outlines the accounting structure of the model. Section three explains the economic rationale and structure of the model. Section four analyzes the obtained results. The last section highlights the main findings with special emphasis on the achievement of the planning targets. The general hypothesis of the 10-year plan is that Egypt will succeed to double its real Per-Capita GDP, reduce the unemployment rate to only 4% and considerably improve welfare level of its citizens. To achieve these goals, the plan relies primarily on enhancing the investments environment. It is assumed then that the gross fixed capital formation in real term will witness a gradual increase with the objectives of raising its share in GDP to around 32 percent at the end of the planning period. The plan assumes as well a considerable increase in foreign direct investments (FDI) and a novel role of government with respect to investment spending, employment policy, encouraging private initiative and promoting exports. When these policies are coupled with improved external balance and enhanced factors productivity, the hypothesis of doubling income and reducing unemployment rate to 4% is expected to be realized. To allow for testing the plan assumptions and main hypotheses, an extended three-sector five-institutions medium/long term economy wide model was constructed and implemented using GAMS. The model follows the computable general equilibrium (CGE) tradition with enhanced inter-period dynamics and detailed treatment of the saving-investment relations. It is developed around a consistent social accounting matrix (SAM) using national income accounts, public finance indicators, balance of payments data and labor market survey The model is used to generate two development paths; the first path (Investment growth) relies on gradually increasing investment spending and attracting more direct foreign investments (FDI). The second development path (Investment growth with productivity) adopts – in addition to investment growth measures - a comprehensive policy package for enhancing total factor productivity. Based on the adopted policy packages, the development paths of the economy can be explained as follows: First, The two tested scenarios have considerably improved the performance of the economy and accelerated its return to normalcy, particularly with respect to the growth, employment and welfare prospects. Both scenarios succeeded also to accelerate the economic recovery period. The investment growth scenario failed however to achieve the planned target of doubling the real per-capita income. Second, the model results suggest that an enhanced investment growth policy should be coupled with a comprehensive package to enhance total factor productivity in order to reach the target of doubling the per-capita income. In light of this finding, the growth of per-capita real GDP – under the two scenarios –is expected to witness an overall increase of 49 percent and 105 percent, respectively. Third, achieving the plan targets is expected to contribute to a structural changes reflected in the relative weights of GDP uses. Fourth, the above results depends to a great extend on the success of the Egyptian government to mobilize domestic and foreign resources in order to achieve a surge in investment spending and a sizable growth in total factors productivity. |
| Keywords: | Egypt, Impact and scenario analysis, General equilibrium modeling |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5121&r=cmp |
| By: | Roger Coupal; Robert Godby; Greg Torell |
| Abstract: | The expansion of wind generation in the United States poses significant challenges to policymakers. Of primary concern is how to optimally incorporate wind in the existing electricity-grid while maintaining power supply at low cost and high reliability. On the supply side, adding generation with the unique characteristics of wind power to the grid presents significant reliability and cost challenges. Wind's intermittency and unpredictability makes scheduling electricity sources in a reliable but efficient way challenging since electricity cannot be stored. To ensure reliability, backstop sources can be added to the grid for use when wind availability is low, but these large fixed capital investments are costly and using them primarily as a backstop ensures lower capital return and higher system costs than when the same technologies are used as primary generators. Transmission capacity and network congestion also limit wind development efforts. Location of wind resources often require new transmission capacity to deliver power to market. Without such capacity wind resources are restricted in their export potential, reducing the return to investment and welfare benefits of such renewable generation facilities. Wind's intermittency can also exacerbate problems of congestion on a transmission constrained grid. On the demand side, electricity demand is unresponsive to cost change, lacking both the information to react to cost conditions and the short-run flexibility with respect to power-use to meaningfully change an inelastic demand. Optimal policy-making with respect to development of wind energy and transmission resources requires some estimate of their costs and benefits, recognizing the stochastic nature of wind resources and transmission constraints on the dynamics of grid electricity cost. This requires a modeling framework that mimics the special nature of electricity markets. This paper attempts to inform such policy concerns by using a recursive optimization simulation model to estimate levels of generation across the two-state region and spanning seasonal variations. A dispatch model incorporates the stochastic aspects of wind generation on a grid with line loss and transmission constraints to estimate the value of additional transmission facilities and expanded wind resources in the Rocky Mountain region of the United States. The simulation model is used to estimate the value of newly built wind resources and planned transmission facilities in the Rocky Mountain Power Area (which includes the state of Colorado, along with most of Wyoming and portions of South Dakota and Nebraska). Price and welfare changes are estimated in these areas as new transmission and wind generation capacity is added to the system. The dispatch model is imbedded in a computable general equilibrium (CGE) model to estimate broader sectoral impacts and regional welfare changes. to estimate economy-wide production, employment, income, and welfare effects. Initial results indicate that the price effects caused by changes in power output at intermittent sources are strongly dependent on the demand conditions and the presence of market distortions caused by the transmission constraints. The peculiarity inherent in electric grid operation can generate responses to policies and congestion that are not always intuitive at the outset. The distribution of the rents accruing to wind generation, particularly in unexpectedly windy periods are strongly dependent on the allocation of transmission rights especially when congestion occurs, which impacts potential returns to developing wind resources. Incidents of congestion depend on the pace of development of transmission capacity. Not accounting for such distortions unique to the electricity grid may cause new development to worsen market outcomes in one region relative to another if mistaken estimates of benefits or costs lead to sub-optimal future development of wind and transmission facilities. Note from admin: see above Note from admin: see above |
| Keywords: | Rocky Mountain region, Energy and environmental policy, General equilibrium modeling |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5488&r=cmp |
| By: | Kenmei Tsubota; Satoru Kumagai; Kazunobu Hayakawa; Ikumo Isono; Souknilanh Keola |
| Abstract: | The purpose of this paper is to evaluate the impact of trade cost reduction on the Asian economy by employing a sub-national level model based on New Economic Geography. Our model comprises seven sectors, including manufacturing and non-manufacturing sectors, and 1,715 regions in 18 countries/economies in Asia in addition to the two economies of the US and the European Union. As a Computable General Equilibrium of New Economic Geography, we have developed a simulation model for multi-region and multi-sector that consists of the agriculture sector, five manufacturing sectors and the service sector. We assume that there are increasing returns to scale in manufacturing and service sectors. We have introduced modal choice and separation of trade costs respect to physical and non-physical infrastructure. While physical infrastructure improvements are expected to have a drastic impact on the distribution of economic activities, we found that the positive effects of physical transport infrastructure improvements are rather limited to the neighboring regions of the projects and that the existing concentrations of economic activities are rather persistent. Furthermore, we also find that, besides the ongoing physical transport infrastructure improvements, further trade facilitation or tackling behind-the-border issues among countries could enhance the prevalence of economic growth in each country. |
| Keywords: | Bangladesh, Brunei Darussalam, Cambodia, China, Hong Kong, India, Indonesia, Japan, Korea, Lao PDR, Macao, Myanmar, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam with rest of the world, Regional modeling, Impact and scenario analysis |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5006&r=cmp |
| By: | HILL, Alessandro; VOß, Stefan |
| Abstract: | In the multi-depot ring star problem (MDRSP) a set of customers has to be connected to a set of given depots by ring stars. Such a ring star is a cycle graph, also called a ring, with some additional nodes assigned to its nodes by single star edges. Optional Steiner nodes can be used in the network as intermediate nodes on the rings. Depot dependant capacity limits apply to both, the number of customers in each ring star and the number of ring stars connected to a depot. The MDRSP asks for a network such that the sum of the edge costs is minimized. In this paper we present a matheuristic that iteratively refines a solution network in a locally exact fashion. In contrast to existing approaches the optimization model that is used to explore the various structural multi-exchange neighborhoods in our algorithm is the MDRSP itself. A first class of neighborhoods considers local sub-networks for optimal improvements. Through an advanced modeling technique we are able to refine arbitrary sub-networks of suitable size induced by simple node sets. A second class aims at globally restructuring the current network after the application of different contraction techniques. For both purposes we develop an exact branch & cut algorithm for the MDRSP that efficiently solves the local optimization problems to optimality, if they are chosen reasonably in terms of size and complexity. The eciency of the approach is shown by computational results improving known upper bounds for instance classes from the literature containing up to 1000 nodes. 91% of the known best objective values are improved up to 13% in competitive computational time. |
| Keywords: | Multi-depot ring star problem, Hybrid heuristic, Branch & cut, Local refinement, Network design, Matheuristic |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2014015&r=cmp |
| By: | Sara Proença |
| Abstract: | Energy is a critical factor not only to economic growth and to achieve a less dependent and more competitive economy but also to promote sustainable growth towards to a highly energyefficient, low-carbon economy. Energy-economic-environment interactions therefore play a crucial role in driving the climate change mitigation and growth policies. The evidence of this is, in particular, the recent adoption by the European Union of an integrated climate and energy policy, by defining ambitious targets for 2020: i) cut its greenhouse gas emissions by 20% from 1990 levels (or even 30% in case an international agreement is reached that commits other countries in a similar way), ii) produce 20% of its energy supply from renewable energy sources, and iii) cut energy consumption through improved energy efficiency by 20% – is the so-called 20/20/20 targets under the EU Climate and Energy Package. In this paper we intend to assess the role of renewable energy sources in Portugal´s decarbonisation strategy up to 2020. This question is of practical relevance for national decision–making on climate and energy policies. In our policy simulations, we make use of the Hybrid Bottom-up General Equilibrium Model (HyBGEM) for Portugal – a hybrid multi-sector E3 general equilibrium model formulated as a mixed complementarity problem, which integrates bottom-up activity analysis into a top-down CGE framework through the detailed technological representation of the electricity sector. HyBGEM is numerically implemented as a system of simultaneous non-linear inequalities using MPSGE (Mathematical Programming System for General Equilibrium analysis) as a subsystem within GAMS (General Algebraic Modelling System), and solved by using the PATH solver. Preliminary results suggest that both the imposition of CO2 emissions constraints and the subsidization of renewable power generation technologies through a feed-in tariffs (FITs) system have a similar impact on overall national CO2 emissions. This is an interesting result because it indicates that the decrease of carbon emissions resulting from achieving the national RES-E target for 2020 also meets the national CO2 reduction target. The promotion of renewable electricity generation is therefore crucial in the decarbonisation strategy of the Portuguese economy |
| Keywords: | Portugal, Energy and environmental policy, General equilibrium modeling |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5647&r=cmp |
| By: | Dirk Willenbockel |
| Abstract: | This study provides an ex-ante computable general equilibrium assessment of the planned Tripartite Free Trade Agreement between the member states of the Common Market for Eastern and Southern Africa, the East African Community and the Southern African Development. Community. The analytical framework is a global 21-region 22-sector CGE trade model.The simulation analysis considers eight distinct trade integration scenarios, that differ in their level of ambition. • All eight trade liberalization scenarios under consideration lead to positive net real income gains for the TFTA area as a whole. • The removal of remaining tariff barriers to intra-COMESA and intra-SADC trade by 2014 in the absence of a TFTA agreement (scenario S1) generates an estimated aggregate annual gain for the TFTA group on the order of US$ 328 million, a modest 0.04 percent of TFTA 2014 baseline final demand for goods and services. • The establishment of a free trade area with a full elimination of all tariffs on trade among all 26 potential partners (scenario S2) is projected to generate an annual welfare gain of US$ 578 million or roughly 0.1 percent of total TFTA area 2014 baseline absorption. Thus, if we assume that complete tariff liberalization within COMESA and SADC without any remaining exceptions for sensitive products will be achieved by 2014 prior to the implementation of TFTA, the additional welfare gain genuinely attributable to TFTA tariff liberalization among the three RECs is around US$ 250 million p.a. for the TFTA group as a whole. • In absolute terms, South Africa enjoys the largest real income gains under full intra-FTA tariff liberalization whereas the largest gains relative to baseline absorption are projected for “Other SACU” (i.e. Swasiland and Lesotho) (+0.8 percent) and Namibia (+0.4 percent).. • Zimbabwe and to a lesser extent Malawi, Zambia, Rwanda, South Central Africa (Angola and DR Congo), Botswana and Other East Africa suffer moderate welfare losses under this scenario as result of a terms-of trade deterioration that dominates the gains from lower consumer prices for TFTA imports. • If Ethiopia, Angola and DR Congo choose not to participate in the TFTA (scenario S3), the aggregate net welfare gain for the area as a whole drops by around US$ 260 million compared to the full participation scenario S2. The simulation results suggest that participation in the free trade agreement would be in Ethiopia’s own interest. • The exclusion of fossil fuels and sugar products as sensitive products from tariff liberalization (scenario S4) would reduce the total welfare gain for the TFTA group by roughly US$ 130 million per annum compared to S2. • The partial tariff liberalization scenario S6, which assumes full liberalisation of capital goods only, 80% tariff cuts on intermediate goods and 50% tariff cut on consumption goods, reduces the net aggregate welfare gain for the TFTA group by nearly US$ 150 million compared to the full liberalization scenario S2, and the increase in aggregate intra-TFTA trade flows is US$ 821 million lower than under S2. • In the least ambitious tariff liberalization scenario under consideration, only baseline tariffs with an ad valorem rate of up to 10 percent are removed completely, whereas tariffs with a higher rate are cut by 50 percent. In this case the aggregate net welfare gain for the TFTA group projected by the model is a meagre 0.04 percent of baseline absorption. • However, the strongest message emerges from the most ambitious TFTA scenario, which combines complete tariff liberalization for intra-TFTA trade with a reduction in non-tariff trade barriers that reduce the costs of border-crossing trade within the TFTA area. The projected aggregate net benefit for the TFTA group amounts to over US$ 3.3 billion per annum, that is nearly 0.4 percent of aggregate baseline absorption and more than five times the gains resulting from full intra-TFTA tariff liberalization alone. • Importantly, in contrast to the S2 scenario all TFTA regions enjoy a positive aggregate welfare gain in this case. The countries with the largest projected percentage increases in real absorption are Zimbabwe (+2.6 percent), Namibia (+2.4 percent), Mozambique (+2.2 percent), Botswana (+1.8 percent) and Other SACU (+1.5 percent). • In this most ambitious scenario, the total volume of intra-TFTA trade is boosted by US$ 7.7 billion, an increase of nearly 20 percent relative to the 2014 baseline volume. • The simulation results do not suggest that TFTA leads to systematic increase in wage inequality. • Significant sectoral production effects with corresponding significant implications for sectoral employment are concentrated in a sub-set of sectors including primarily sugar products with backward linkage effects to sugar cane production, beverages and tobacco and light manufacturing, and to a lesser extent for some TFTA countries in textiles, metals and metal production, and chemicals. |
| Keywords: | Multi-country with focus on Sub-Saharan Africa, Trade issues, General equilibrium modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:7232&r=cmp |
| By: | Hans Fehr; Manuel Kallweit; Fabian Kindermann |
| Abstract: | The present paper quantifies the importance of family structures for the analysis of social security. For this reason we introduce home production as well as stable and unstable families into the standard stochastic overlapping generation model and simulate with each model version a move from a unfunded towards a funded pension system in Germany. The simulation exercise computes intergenerational welfare changes and isolates aggregate efficiency effects by means of compensating transfers. Comparing the macroe-conomic and welfare consequences resulting from the elimination of social security in the standard and in two-earner family models indicates two major conclusions. First, the consideration of home production has significant effects on labor supply and eco-nomic efficiency. Second, the impact of family insurance is fairly weak and can hardly substitute for social security. See above See above |
| Keywords: | Germany, General equilibrium modeling, Public finance |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5280&r=cmp |
| By: | Robert E. Wright; Katerina Lisenkova; Marcel Merette |
| Abstract: | This paper provides empirical estimates of the impact of immigration on economic growth. A dynamic overlapping generations computable general equilibrium (OLG-CGE) model is used for this purpose. The basic structure of the model follows in the Auerbach and Kotlikoff tradition. However, the model takes into consideration directly age-specific mortality. This is analogous to “building in” a cohort-component population projection structure to the model, which allows more complex and more realistic demographic scenarios to be considered. The model is calibrated for Scotland. Scotland is an interesting case study since it is likely that both the population and the labour force will decrease in size considerably in the future. In addition, the population is expected to age rapidly over the coming decades. The analysis suggests that modest levels of net-migration, driven by higher levels of immigration, are associated with considerably higher levels of economic growth. See above See above |
| Keywords: | NA, General equilibrium modeling, Growth |
| Date: | 2013–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:004912:5607&r=cmp |
| By: | Fajar Oktiyanto; Harmanta; Nur M. Adhi Purwanto; Aditya Rachmanto |
| Abstract: | The experience from the recent global financial crisis on 2008/2009 showed that most macroeconomic instabilities came from the financial/banking sector. The condition of the financial system may affect monetary stability, through excessive pro-cyclicality in the financial system. Agung et al (2010) stated that pro-cyclicality level of financial sector in Indonesia is quite high. The evidence can be seen from the real credit which grew faster than GDP in the period of expansion, and vice versa. On the other hand, monetary policy may also affect the company's risk-taking behavior in financial markets, by affecting the company’s balance sheet as well as bank (credit portfolio, asset, etc.), which in turn will affect the stability of the financial system. Bernanke and Gertler (2001) stated that an aggressive monetary policy will not provide a significant advantage to regulate the movement of asset prices, due to the large volatility of financial variables. Hence, it is necessary to establish a combination of policy instruments to achieve price stability and financial stability. To formulate policies for price stability and financial market, we built a DSGE model that has the ability to simulate the effects of monetary and macroprudential policies in Indonesia. We incorporated a credit channel and financial intermediation mechanism in the model to capture pro-cyclicality in the financial sector, which will influence the dynamics of the business cycle, as suggested by Roger and Vleck (2011). The model is built on the basis of Gerali et al (2010) who have entered the banking sector with collateral constraint in the New Keynesian DSGE models a la Christiano et al (2005), and also adding a model of the financial accelerator approach a la Bernanke et al (1999) which has been modified by Zhang (2009). We used two approaches to model financial frictions in the financial sector: (i) collateral constraint, imposed on bank lending to households; and (ii) financial accelerator, imposed on lending to entrepreneurs. Collateral constraints mechanism in the household borrowing allows simulation of macroprudential policies such as the LTV ratio, which has been implemented in Indonesia for the last few years. On the other hand, the financial accelerator mechanism imposed on the entrepreneurs affected their decision to borrow from the bank to purchase their capital needs. The model that we developed is a small open economy DSGE model that has economic agents such as households (patient and impatient) conducting consumption, labor supply, savings to and borrowings from banks and paying taxes to the government. In addition there are entrepreneurs, intermediate good producers, capital good producers, housing producers and final good producers associated with the production of goods, the production of capital, as well as the final goods aggregator. This model also has a wide range of retailers, namely domestic retailers, importer retailers and exporter retailers that served to differentiate homogenous goods at no cost and sell them at a certain profit, with the opportunity to change the selling price following the usual mechanism from Calvo (1983). The condition of the financial system may affect monetary stability, through excessive pro-cyclicality in the financial system. The evidence can be seen from the real credit which grew faster than GDP in the period of expansion, and vice versa. On the other hand, monetary policy may also affect the company's risk-taking behavior in financial markets, by affecting the company’s balance sheet as well as bank (credit portfolio, asset, etc.), which in turn will affect the stability of the financial system. Hence, it is necessary to establish a combination of policy instruments to achieve price stability and financial stability. This model should describe the economic condition under monetary and macro prudential policy mix response if there are any shock happened. As the result, the model has detail treatment of banking sector according to Indonesia context. The transmission of macro-prudential policy shock is studied by analyzing the impulse responses to shock some variable, especially LTV. We find that macro-prudential policy plays an important role to dampen excessive economic and financial cycles in Indonesia. We also find that the results are better when macro-prudential instruments are exercised together with appropriate monetary policy responses. Therefore coordination between monetary policy and macro-prudential policy is critical In order to obtain optimum results in achieving macroeconomic stability and financial system stability. |
| Keywords: | Indonesia, General equilibrium modeling, Agent-based modeling |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:006356:6840&r=cmp |