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

  1. ORANI-IT: a computable general equilibrium model of Italy By Francesco Felici; Maria Gesualdo
  2. Order Placement in a Continuous Double Auction Agent Based Model By Alexandru Mandes
  3. Macroeconomies as Constructively Rational Games By Sinitskaya, Ekaterina; Tesfatsion, Leigh
  4. Consequences of Climate Change Damages for Economic Growth: A Dynamic Quantitative Assessment By Rob Dellink; Elisa Lanzi; Jean Chateau; Francesco Bosello; Ramiro Parrado; Kelly de Bruin
  5. Impact of Sensitive Lists under SAFTA: Quantitative Assessment using a Partial Equilibrium Modeling By Shahid Ahmed; Sushil Kumar
  6. Optimal Adaptation and Mitigation to Climate Change in Small Environmental Economies By Omar Chisari; Sebastian Galiani; Sebastian Miller
  7. Environmental Aspects of Resource Extraction Contracts By Hanna Krings
  8. Islamic vs. conventional banks in the GCC countries: A comparative study using classification techniques By Karim ben Khediri; Lanouar Charfeddine; Slah ben Youssef

  1. By: Francesco Felici; Maria Gesualdo
    Abstract: This paper presents the comparative-static national disaggregate Computable General Equilibrium (CGE) model of the Italian economy, ORANI-IT, which represents the starting point to the development of a tax CGE model of Italy. The model, designed at the Department of Treasury of the Italian Ministry of the Economy and Finance, in collaboration with the Centre of Policy Studies (CoPS), and currently managed at Sogei S.p.A. (IT Economia - Modelli di Previsione ed Analisi Statistiche), is intended for policy analysis. The aim of this paper is to provide a complete description of the theoretical specification of the model and to illustrate the process of compiling the model�s database. Departing from the core structure, features of the Italian model in the context of ORANI-style models, developed at CoPS, are highlighted, as data availability allowed us to improve the modelling of the investment matrix and the demand of labour. The result is a more reliable model with a broader level of analysis. The paper concludes with the model�s validation, which among several checks, consists in an illustrative two targets/two instruments simulation.
    Keywords: Computable general equilibrium (CGE) model, model's validation, Italy
    JEL: C68 E10 E60
    Date: 2014–08
  2. By: Alexandru Mandes (University of Gießen)
    Abstract: Modeling intraday financial markets by means of agent based models requires an additional building block which reflects the order execution, i.e. the trading process. Current implementations rely only on stochastic placement strategies, ranging from total randomness to adding some budget constraints. This contribution addresses the issue of order placement for low-tech traders, by replacing the zero-intelligence assumption with a microtrading-based approach. The results show that the power-law decaying relative price distribution of off-spread limit orders and the concave shape of the overall market price impact can be replicated when rational order submission strategies are used.
    Keywords: agent based modeling, high-frequency financial markets, continuous double auction, order placement, market impact
    JEL: C63 N20
    Date: 2014
  3. By: Sinitskaya, Ekaterina; Tesfatsion, Leigh
    Abstract: Real-world decision-makers are forced to be locally constructive, in the sense that their actions are constrained by the interaction networks, limited information, and computational capabilities at their disposal.� This study poses the following question:� Suppose utility-seeking consumers and profit-seeking firms in an otherwise standard dynamic macroeconomic model are required to be locally constructive decision-makers, unaided by the external imposition of global coordination conditions.� What combinations of locally constructive decision rules result in good macroeconomic performance relative to a social planner benchmark model, and what are the game-theoretic properties of these decision-rule combinations?� We begin our investigation of this question by specifying locally constructive decision rules for the consumers and firms that range from simple reinforcement learning to sophisticated adaptive dynamic programming algorithms.� We then use computational experiments to explore macroeconomic performance under alternative decision-rule combinations.� A key finding is that simpler rules can outperform more sophisticated rules, but that forward-looking behavior coupled with a relatively long memory permitting past observations to inform current decision-making is critical for good performance.
    Keywords: Learning; Macroeconomics; agent-based; game; stochastic optimization
    JEL: B4 C6 C7 E2
    Date: 2014–08–22
  4. By: Rob Dellink; Elisa Lanzi; Jean Chateau; Francesco Bosello; Ramiro Parrado; Kelly de Bruin
    Abstract: This report focuses on the effects of climate change impacts on economic growth. Simulations with the OECD’s dynamic global general equilibrium model ENV-Linkages assess the consequences of a selected number of climate change impacts in the various world regions at the macroeconomic and sectoral level. This is complemented with an assessment of very long-run implications, using the AD-RICE model. The analysis finds that the effect of climate change impacts on annual global GDP is projected to increase over time, leading to a global GDP loss of 0.7% to 2.5% by 2060 for the most likely equilibrium climate sensitivity range. Underlying these annual global GDP losses are much larger sectoral and regional variations. Agricultural impacts dominate in most regions, while damages from sea level rise gradually become more important. Negative economic consequences are especially large in South and South-East Asia whereas other regions will be less affected and, in some cases, benefit thanks to adjustments from international trade. Emissions to 2060 will have important consequences in later decades and centuries. Simulations with the AD-RICE model suggest that if emissions continue to grow after 2060, annual damages of climate change could reach 1.5%-4.8% of GDP by the end of the century. Some impacts and risks from climate change have not been quantified in this study, including extreme weather events, water stress and large-scale disruptions. These will potentially have large economic consequences, and on balance the costs of inaction presented here likely underestimate the full costs of climate change impacts. More research is needed to assess them as well as the various uncertainties and risks involved. However, this should not delay policy action, but rather induce policy frameworks that are able to deal with new information and with the fact that by their nature some uncertainties and risks will never be resolved. Conséquences des impacts du changement climatique sur la croissance économique : Une évaluation quantitative en dynamique Ce rapport approfondit les impacts du changement climatique sur la croissance économique. Sur la base de simulations dynamiques, effectuées avec le modèle d'équilibre général de l'OCDE ENV-Linkages, les conséquences sur la croissance de long terme d'un certain nombre d'impacts du changement climatique sont évaluées. Une appréciation des conséquences à très long terme avec le modèle AD-RICE complète cette analyse. L'analyse révèle que les effets des impacts du changement climatique sur le PIB annuel mondial devraient s’accroître à l’avenir, conduisant à une perte de PIB mondial de 0,7% à 2,5% en 2060, selon un éventail raisonnable de sensibilités climatiques. L’analyse souligne en outre de fortes disparités dans les impacts selon les secteurs et les régions concernées. Dans la plupart des régions, les impacts sur les rendements agricoles dominent, cependant la raréfaction des surfaces cultivables due à la montée des océans prend de plus en plus d’importance. Les conséquences économiques négatives devraient être particulièrement élevées dans le Sud et Sud-Est de l'Asie, tandis que les autres régions seraient moins affectées et, pourraient même, dans certains cas, bénéficier du changement climatique, grâce notamment aux ajustements du commerce international. Les émissions de gaz à effets de serre dégagées jusqu’en 2060 auront d'importantes conséquences dans les décennies et des siècles qui suivront. Des simulations effectuées avec le modèle AD-RICE suggèrent que si les émissions continuent à augmenter après 2060, les dommages annuels du changement climatique pourraient atteindre 1,5% -4,8% du PIB d'ici la fin du siècle. Certains impacts et risques du changement climatique ne sont pas quantifiés dans ce rapport, y compris des événements météorologiques extrêmes, le stress hydrique et des perturbations à grande échelle. Ceux-ci pourraient avoir de grandes conséquences économiques et, finalement, les coûts de l'inaction présentés dans ce rapport sous-estiment probablement les coûts totaux des impacts du changement climatique. Un progrès de la science dans ces domaines seraient nécessaire afin de mieux comprendre ces sujets ainsi que les divers incertitudes et risques associés. Toutefois, cela ne devrait pas retarder l'action politique, mais plutôt inciter à circonscrire des cadres politiques capables de faire face à de tenir compte de ces nouvelles informations.
    Keywords: economic growth, climate change, computable general equilibrium model, changement climatique, modèle d’équilibre général calculable, croissance économique
    JEL: D58 O44 Q54
    Date: 2014–06–30
  5. By: Shahid Ahmed; Sushil Kumar
    Abstract: The long list of product in sensitive list maintained by the member countries is one of the major weaknesses of South Asia Free Trade agreement for its effectiveness. Present study analyzes the impact of sensitive list (Phase II) under the SAFTA at disaggregate level (HS6 digit) by using partial equilibrium modeling. This paper more specifically looked at consumer surplus, trade creation, trade diversion as well as impact on tariff revenues among India, Pakistan, Sri Lanka and Bangladesh as a result of removal of sensitive list. The study indicates positive effect on consumer surplus and trade flows; and negative effect on tariff revenues. RCA index indicated comparative advantage in textiles, machinery/ electric product, chemicals and allied products and metal products and different categories of textile products. The simulation results shows that aggregate total trade effect is US$ 902.82 million and a surge in export of crude oil, technically specified natural rubber, cotton, smoked sheets, articles of apparel and clothing accessories etc. Finally, the study recommended that each country should reduce the sensitive list.
    JEL: F13 F17
    Date: 2014–08–28
  6. By: Omar Chisari; Sebastian Galiani; Sebastian Miller
    Abstract: This paper compares the optimal dynamic choices between policies of mitigation and adaptation for three economies: Brazil, Chile and the United States. The focus is on the optimal role of mitigation and adaptation for “environmentally small economies,” i. e. , economies that are witnessing an exogenous increase in emissions to which they are contributing very little. The simulations lead to three main conclusions. First, small economies should concentrate their environmental efforts, if any, on adaptation. This is not a recommendation that such economies indulge in free-riding. Instead, it is based on considerations of cost effectiveness, ceteris paribus. Second, small economies that are unable to spend enough on adaptation may end up spending less on mitigation owing to their impoverishment as a result of negative climate shocks. Third, higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures, but also because of increased adaptation to the incentives for mitigation provided by richer countries.
    JEL: Q52 Q54
    Date: 2013–10
  7. By: Hanna Krings (University of Aachen)
    Abstract: This paper analyzes resource partnerships and their influence on the environmental quality in a resource-rich country by introducing incomplete contracts, imperfect property rights protection, and a lack of valuation for the environment by the government in the South. Employing numerical simulations, I determine the equilibrium extraction rate, the applied extraction technology, and the environmental quality in dependence of the state of democracy in the resource-rich country. In contrast to what one might expect, under certain circumstances it can be environmentally beneficial to have incomplete contracts that induce the utilization of a suboptimal technology for resource extraction. Further, reducing the holdup problem by shifting bargaining power to the North, is only desirable if the environmental quality in- creases with a better extraction technology.
    Keywords: Resource Extraction, Environment, North-South Trade
    JEL: F18 Q37 Q56
    Date: 2014
  8. By: Karim ben Khediri; Lanouar Charfeddine; Slah ben Youssef
    Abstract: This paper contributes to the empirical literature on Islamic finance by investigating the feature of Islamic and conventional banks in Gulf Cooperation Council (GCC) countries over the period 2003-2010. We use parametric and non-parametric classification models (Linear discriminant analysis, Logistic regression, Tree of classification and Neural network) to examine whether financial ratios can be used to distinguish between Islamic and conventional banks. Univariate results show that Islamic banks are, on average, more profitable, more liquid, better capitalized, and have lower credit risk than conventional banks. We also find that Islamic banks are, on average, less involved in off-balance sheet activities and have more operating leverage than their conventional peers. Results from classification models show that the two types of banks may be differentiated in terms of credit and insolvency risk, operating leverage and off-balance sheet activities, but not in terms of profitability and liquidity. More interestingly, we find that the recent global financial crisis has a negative impact on the profitability for both Islamic and conventional banks, but time shifted. Finally, results show that Logit regression obtained slightly higher classification accuracies than other models.
    Keywords: Islamic finance; GCC banking; classification techniques; linear discriminant analysis; logit; tree of classification; neural network.
    JEL: C44 C45 C25 G21 G28
    Date: 2014–08–29

This nep-cmp issue is ©2014 by Stan Miles. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.