nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒11‒17
eight papers chosen by
Stan Miles
Thompson Rivers University

  1. TFP, R&D AND SEMI ENDOGENOUS GROWTH IN RHOMOLO By Enrique Lopez Bazo; Fabio Manca
  2. Cost Model Based Service Placement in Federated Hybrid Clouds By Jorn Altmann; Mohammad Mahdi Kashef
  3. SBAM: An algorithm for pair matching By Stephensen, Peter; Markeprand, Tobias
  4. Fast Numerical Method for Pricing of Variable Annuities with Guaranteed Minimum Withdrawal Benefit under Optimal Withdrawal Strategy By Xiaolin Luo; Pavel Shevchenko
  5. A General Microsimulation Model for the EU VAT with a specific Application to Germany By Lars-H. R. Siemers
  6. Estimation of Ergodic Agent-Based Models by Simulated Minimum Distance By Jakob Grazzini; Matteo Richiardi
  7. Macro Stress-Testing Credit Risk in Romanian Banking System By Ruja, Catalin
  8. Product and Labor Market Regulations, Production Prices, Wages and Productivity. By G. Cette; J. Lopez; J. Mairesse

  1. By: Enrique Lopez Bazo (European Commission – JRC - IPTS); Fabio Manca (European Commission – JRC - IPTS)
    Abstract: This paper describes the semi-endogenous growth approach used in the dynamic spatial general equilibrium model RHOMOLO. We illustrate here how regional R&D expenditures can be used to explain Total Factor Productivity differentials across regions and how shocks to the former end up affecting regional economic performances and economic convergence. As to do so, the current contribution provides econometric estimates of the relationship between regional productivity and R&D intensity by applying the technology catch-up model proposed by Benhabib and Spiegel (2005) to the EU-regional context. We then use the estimated elasticities within the DSCGE framework while also building a simple simulation example to illustrate the potential of the model in capturing the heterogeneous income effects produced a shock to regional R&D expenditures.
    Keywords: TFP, R&D, CGE model, regional policy
    JEL: C51 C68 O47 R12
    Date: 2014–10
  2. By: Jorn Altmann (College of Engineering, Seoul National University); Mohammad Mahdi Kashef (College of Engineering, Seoul National University)
    Abstract: As cloud federation allows companies in need of computational resources to use computational resources hosted by different cloud providers, it reduces the cost of IT infrastructure by lowering capital and operational expenses. This is the result of economies of scale and the possibility for organizations to purchase just as much computing and storage resources as needed whenever needed. However, a clear specification of cost savings requires a detailed specification of the costs incurred. Although there are some efforts to define cost models for clouds, the need for a comprehensive cost model, which covers all cost factors and types of clouds, is undeniable. In this paper, we cover this gap by suggesting a cost model for the most general form of a cloud, namely federated hybrid clouds. This type of cloud is composed of a private cloud and a number of interoperable public clouds. The proposed cost model is applied within a cost minimization algorithm for making service placement decisions in clouds. We demonstrate the workings of our cost model and service placement algorithm within a specific cloud scenario. Our results show that the service placement algorithm with the cost model minimizes the spending for computational services.
    Keywords: Cloud Computing, Federated Hybrid Clouds, Infrastructure-as-a-Service, Virtual Machine Migration, Cost Model, IT Cost Factors, OPEX, CAPEX, Cloud Economics, Cost Model Comparison, Service Placement.
    JEL: C61 C63 D24 L15 L86 M15
    Date: 2014–09
  3. By: Stephensen, Peter; Markeprand, Tobias
    Abstract: This paper introduces a new algorithm for pair matching. The method is called SBAM (Sparse Biproportionate Adjustment Matching) and can be characterized as either cross-entropy minimizing or matrix balancing. This implies that we use information efficiently according to the historic observations on pair matching. The advantage of the method is its efficient use of information and its reduced computational requirements. We compare the resulting matching pattern with the harmonic and ChooSiow matching functions and find that in important cases the SBAM and ChooSiow method change the couples pattern n in the same way. We also compare the computational requirements of the SBAM with alternative methods used in microsimulation models. The method is demonstrated in the context of a new Danish microsimulation model that has been used for forecasting the housing demand.
    Keywords: matching microsimulation
    JEL: C02 C51 C53 C54
    Date: 2013–10–31
  4. By: Xiaolin Luo; Pavel Shevchenko
    Abstract: A variable annuity contract with Guaranteed Minimum Withdrawal Benefit (GMWB) promises to return the entire initial investment through cash withdrawals during the policy life plus the remaining account balance at maturity, regardless of the portfolio performance. Under the optimal withdrawal strategy of a policyholder, the pricing of variable annuities with GMWB becomes an optimal stochastic control problem. So far in the literature these contracts have only been evaluated by solving partial differential equations (PDE) using the finite difference method. The well-known Least-Squares or similar Monte Carlo methods cannot be applied to pricing these contracts because the paths of the underlying wealth process are affected by optimal cash withdrawals (control variables) and thus cannot be simulated forward in time. In this paper we present a very efficient new algorithm for pricing these contracts in the case when transition density of the underlying asset between withdrawal dates or its moments are known. This algorithm relies on computing the expected contract value through a high order Gauss-Hermite quadrature applied on a cubic spline interpolation. Numerical results from the new algorithm for a series of GMWB contract are then presented, in comparison with results using the finite difference method solving corresponding PDE. The comparison demonstrates that the new algorithm produces results in very close agreement with those of the finite difference method, but at the same time it is significantly faster; virtually instant results on a standard desktop PC.
    Date: 2014–10
  5. By: Lars-H. R. Siemers (University of Siegen)
    Abstract: The sales taxes in the EU|and in several other countries|are practiced as value-added tax of the consumption type with invoice method. Literature on microsimulation models (MSM) for this type of VAT is rare, though the importance of VAT has continuously increased. We discuss the issues of VAT-MSM in detail and develop a basic general VAT-MSM, applicable to the EU member states (and beyond). To illustrate the functioning of the general model, we apply it in detail to the specific case of Germany. We provide comprehensive estimation results for the distributional and fiscal effects of the German VAT. Finally, we simulate the effects of a small VAT reform in 2010, comparing static and behavioral response simulations.
    Keywords: VAT microsimulation VAT exemption RWI-VAT-SIM EU
    JEL: C6 D12 D31 D63
    Date: 2014
  6. By: Jakob Grazzini (Catholic University of Milan, Dept of Economics and Finance); Matteo Richiardi (Institute for New Economic Thinking, Nuffield College, Oxford and Collegio Carlo Alberto)
    Abstract: Two diculties arise in the estimation of AB models: (i) the criterion function has no simple analytical expression, (ii) the aggregate properties of the model cannot be analytically understood. In this paper we show how to circumvent these diculties and under which conditions ergodic models can be consistently estimated by simulated minimum distance techniques, both in a long-run equilibrium and during an adjustment phase.
    Keywords: Agent-based Models, Consistent Estimation, Method of Simulated Moments.
    JEL: C15 C63
    Date: 2014–10–21
  7. By: Ruja, Catalin
    Abstract: This report presents an application of a macro stress testing procedure on credit risk in the Romanian banking system. Macro stress testing, i.e. assessing the vulnerability of financial systems to exceptional but plausible macroeconomic scenarios, maintains a central role in macro-prudential and crisis management frameworks of central banks and international institutions around the globe. Credit risk remains the dominant risk challenging financial stability in the Romanian financial system, and thus this report analyses the potential impact of macroeconomic shocks scenarios on default rates in the corporate and household loan portfolios in the domestic banking system. A well-established reduced form model is proposed and tested as the core component of the modelling approach. The resulting models generally confirm the influence of macroeconomic factors on credit risk as documented in previous research including applications for Romania, but convey also specific and novel findings, such as inclusion of leading variables and construction activity level for corporate credit risk. Using the estimated model, a stress testing simulation procedure is undertaken. The simulation shows that under adverse shock scenarios, corporate default rates can increase substantially more than the expected evolution under the baseline scenario, especially in case of GDP shock, construction activity shock or interest rate shocks. Under the assumptions of these adverse scenarios, given also the large share of corporate loans in the banks’ balance sheet, the default rates evolution could have a substantial impact on banks’ loan losses. The households sector stress testing simulation show that this sector is more resilient to macroeconomic adverse evolutions, with stressed default rates higher than expected values under baseline scenario, but with substantially lower deviations. The proposed macro-perspective model and its findings can be incorporated by private banks in their micro-level portfolio risk management tools. Additionally, supplementing the authorities’ stress tests with independent approaches can enhance credibility of such financial stability assessment.
    Keywords: Stress Testing, Macro Stress Testing, Credit Risk, Banking Crisis, Monte Carlo simulation, Romania
    JEL: C01 C12 C13 C15 C32 C52 C53 C87 E58 G01 G21
    Date: 2014–07–23
  8. By: G. Cette; J. Lopez; J. Mairesse
    Abstract: This study is to our knowledge the first attempt to infer the consequences on productivity entailed by anticompetitive regulations in product and labor markets through their impacts on production prices and wages. Results are encouraging showing that changes in production prices and wages at country*industry levels are informative about the creation of rents impeding productivity in different ways and to different extents. A simulation based on these results and on OECD regulation indicators suggests that nearly all countries, in particular European countries, could expect sizeable gains in multifactor productivity over the years from an economic policy that would be able to reform product and labor market regulation practices.
    Keywords: Productivity, market imperfections, anticompetitive regulations, rents.
    JEL: C23 L16 L50 O43 O47
    Date: 2014

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