nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒10‒22
eight papers chosen by

  1. Labor Markets in Computable General Equilibrium Models By Flaig, Dorothee; McDonald, Scott; Grethe, Harald
  2. Pareto-improving Immigration and Its Effect on Capital Accumulation in the Presence of Social Security By Hisahiro Naito
  3. Evaluating the performance of VaR models in energy markets By Sasa Zikovic; Rafal Weron; Ivana Tomas Zikovic
  4. Floating-point numbers: a visit through the looking glass By William Gould
  5. Sudden Trust Collapse in Networked Societies By Jo\~ao da Gama Batista; Jean-Philippe Bouchaud; Damien Challet
  6. How Would Farm Managers Respond to a Limit on Crop Insurance Premium Subsidies? By Davis, Todd D.; Anderson, John A.; Young, Robert E. III
  7. Research note: A feasible way to implement a Citizen’s Income By Torry, Malcolm
  8. Date stamping historical oil price bubbles: 1876 - 2014 By Itamar Caspi; Nico Katzke; Rangan Gupta

  1. By: Flaig, Dorothee; McDonald, Scott; Grethe, Harald
    Keywords: Labor and Human Capital, Research Methods/ Statistical Methods,
    Date: 2013–12
  2. By: Hisahiro Naito (Department of Economics, Graduate School of Humanities and Social Sciences,University of Tsukuba,)
    Abstract: The effect of accepting more immigrants on welfare in the presence of a pay-as-you- go social security system is analyzed qualitatively and quantitatively. First, it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto-improving way by increasing the percentage of immigrants to natives (PITN). Second, using the computational overlapping generation model, the welfare gain is calculated of increasing the PITN from 15.5 percent to 25.5 percent and years needed to reach the (modified) golden rule level in a Pareto-improving way in a model economy. The simulation shows that the present value of the welfare gain of increasing the PITN comprises 23 percent of the initial GDP. It takes 112 years for the model economy to reach the golden rule level in a Pareto-improving way.
    Date: 2014–09
  3. By: Sasa Zikovic; Rafal Weron; Ivana Tomas Zikovic
    Abstract: In this paper we analyze the relative performance of 13 VaR models using daily returns of WTI, Brent, natural gas and heating oil one-month futures contracts. After obtaining VaR estimates we evaluate the statistical significance of the differences in performance of the analyzed VaR models. We employ the simulation-based methodology proposed by Zikovic and Filer (2013), which allows us to rank competing VaR models. Somewhat surprisingly, the obtained results indicate that for a large number of different VaR models there is no statistical difference in their performance, as measured by the Lopez size adjusted score. However, filtered historical simulation (FHS) and the semiparametric BRW model stand out as robust and consistent approaches that – in most cases – significantly outperform the remaining VaR models.
    Keywords: Energy markets; Risk management; Value at Risk; Multicriteria classification
    JEL: C14 C22 C52 C53 G24
    Date: 2014–10–03
  4. By: William Gould (StataCorp LP)
    Abstract: Researchers do not adequately appreciate that floating-point numbers are a simulation of real numbers and, as with all simulations, some features are preserved while others are not. When writing code, or even do-files, treating the computer's floating-point numbers as if they were real numbers can lead to substantive problems and to numerical inaccuracy. In this, the relationship between computers and real numbers is not entirely unlike the relationship between tea and Douglas Adams' Nutri-Matic drink dispenser. The Nutri-Matic produces a concoction that is "almost, but not quite, entirely unlike tea." Gould shows what the universe would be like if it was implemented in floating-point rather than in real numbers. The floating-point universe turns out to be nothing like the real universe and probably could not be made to function. Without jargon and without resort to binary, Gould shows how floating-point numbers are implemented on an imaginary base-10 computer and quantifies the kinds of errors that can arise. In this, floating-point subtraction stands out as really being almost, but not quite, entirely unlike subtraction. Gould shows out how to work around such problems. The point of the talk is to build your intuition about the floating-point world so that you as a researcher can predict when calculations might go awry, know how to think about the problem, and determine how to fix it.
    Date: 2014–08–02
  5. By: Jo\~ao da Gama Batista; Jean-Philippe Bouchaud; Damien Challet
    Abstract: Trust is a collective, self-fulfilling phenomenon that suggests analogies with phase transitions. We introduce a stylized model for the build-up and collapse of trust in networks, which generically displays a first order transition. The basic assumption of our model is that whereas trust begets trust, panic also begets panic, in the sense that a small decrease in trust may be amplified and ultimately lead to a sudden and catastrophic drop of trust. We show, using both numerical simulations and mean-field analytic arguments, that there are extended regions of the parameter space where two equilibrium states coexist: a well-connected network where confidence is high, and a poorly connected network where confidence is low. In these coexistence regions, spontaneous jumps from the well-connected state to the poorly connected state can occur, corresponding to a sudden collapse of trust that is not caused by any major external catastrophe. In large systems, spontaneous crises are replaced by history dependence: whether the system is found in one state or in the other essentially depends on initial conditions. Finally, we document a new phase, in which agents are connected yet distrustful.
    Date: 2014–09
  6. By: Davis, Todd D.; Anderson, John A.; Young, Robert E. III
    Abstract: A stochastic simulation model is used to determine crop insurance premiums and farm program payments for a Illinois corn-soybean and Mississippi corn-soybean-rice-cotton farm. The optimal portfolio of crop insurance and farm programs are determined subject to payment limitations and crop insurance subsidy constraints.
    Keywords: farm management, risk management, farm policy, Agricultural and Food Policy, Farm Management, Risk and Uncertainty,
    Date: 2014
  7. By: Torry, Malcolm
    Abstract: Citizen’s Income – an unconditional and nonwithdrawable income for every individual – would offer many advantages, but transition from the UK’s current largely means-tested benefits system to one based on a Citizen’s Income might generate initial losses for some low-income households, and this could make a Citizen’s Income politically unattractive. This paper employs EUROMOD to study the initial losses that a variety of different Citizen’s Income schemes would generate, and finds that in those schemes in which a Citizen’s Income replaces most means-tested benefits, substantial household losses would occur, both generally and for households in the lowest disposable income decile, whereas where means-tested benefits are not abolished, but instead the Citizen’s Income reduces means-tested benefits in the same way that other existing income does, almost no households in the lowest disposable income decile suffer initial losses, and initial losses generally are at a manageable level. This means that there is at least one method for implementing a Citizen’s Income that could be politically attractive.
    Date: 2014–09–18
  8. By: Itamar Caspi; Nico Katzke; Rangan Gupta
    Abstract: This paper sets out to date-stamp periods of historic oil price explosivity (or bubbles) us- ing the Generalized sup ADF (GSADF) test procedure suggested by Phillips et al. (2013). The date-stamping strategy used in this paper is effective at identifying periodically col- lapsing bubbles; a feature found lacking with previous bubble detecting methods. We set out to identify bubbles in the real price and the nominal price-supply ratio of oil for the period 1876 - 2014. The recursive identification algorithms used in this study identifies several periods of significant explosivity, and as such provides future researchers with a reference for studying the macroeconomic impact of historical periods of significant oil price build-ups.
    Keywords: Oil-prices; Date-Stamping Strategy; Periodically Collapsing Bubbles; Explosivity; Flexible Window; GSADF Test; Commodity Price Bubbles.
    JEL: C15 C22
    Date: 2014–09–25

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