nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒01‒14
eight papers chosen by
Stan Miles
Thompson Rivers University

  1. Welfare impact of broadening VAT by exempting local food markets: The case of Bangladesh By Levin, Jörgen; Sayeed, Yeasmin
  2. Centrality Computation in Weighted Networks Based on Edge-Splitting Procedure By Belik, Ivan; Jörnsten, Kurt
  3. What is the social value of second-generation biofuels ? By Hertel, Thomas W.; Steinbuks, Jevgenijs; Tyner, Wallace E.
  4. Monetary Policy and Dark Corners in a stylized Agent-Based Model By Stanislao Gualdi; Marco Tarzia; Francesco Zamponi; Jean-Philippe Bouchaud
  5. The Stock Return - Trading Volume Relationship in European Countries: Evidence from Asymmetric Impulse Responses By Ralf Brüggemann; Markus Glaser; Stefan Schaarschmidt; Sandra Stankiewicz
  6. Generational Risk--Is it a Big Deal?: Simulating an 80-Period OLG Model With Aggregate Shocks By Laurence Kotlikoff; Jasmina Hasanhodzic
  7. The use of heuristic optimization algorithms to facilitate maximum simulated likelihood estimation of random parameter logit models By Arne Risa Hole; Hong Il Yoo
  8. Optimal Strategies in Unionized Oligopoly and Inward FDI By Minas Vlassis; Stefanos Mamakis

  1. By: Levin, Jörgen (Örebro University School of Business); Sayeed, Yeasmin (Örebro University School of Business)
    Abstract: The spread of value-added tax (VAT) in developing countries has been dramatic since the beginning of 1990’s. Adopted by more than 130 countries, including many of the poorest, VAT has been, and remains, the key of tax reform in many developing countries. While adopting VAT, there are arguments for and against uniform general VAT system. A uniform and general VAT on all commodities is considered to be efficient and less distortionary. On the other hand, from the distributional perspective many goods especially food is exempted from VAT as low income households spend a high share of income on food. The contribution of this study is to analyze the income distribution and welfare impact of VAT reform when the food sectors are divided into local markets and supermarkets. A Computable General Equilibrium (CGE) model is used to evaluate the consequences of VAT reforms for Bangladesh. Our simulation results show that, a VAT reform that exempts the agriculture sector and local market food commodities provides the best welfare and distributional impact.
    Keywords: VAT; VAT reform; incidence analysis; equity and welfare; CGE; Bangladesh
    JEL: H21 H22 H23 I31
    Date: 2014–12–12
  2. By: Belik, Ivan (Dept. of Business and Management Science, Norwegian School of Economics); Jörnsten, Kurt (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: The analysis of network’s centralities has a high-level significance for many real-world applications. The variety of game and graph theoretical approaches has a paramount purpose to formalize a relative importance of nodes in networks. In this paper we represent an algorithm for the centrality calculation in the domain of weighted networks. The given algorithm calculates network centralities for weighted graphs based on the proposed procedure of edges’ splitting. The approach is tested and illustrated based on different types of network topologies.
    Keywords: Network centrality; weighted graphs; edge splitting
    JEL: C00
    Date: 2014–12–18
  3. By: Hertel, Thomas W.; Steinbuks, Jevgenijs; Tyner, Wallace E.
    Abstract: What is second-generation biofuel technology worth to global society? A dynamic, computable partial equilibrium model (called FABLE) is used to assess changes in global land use for crops, livestock, biofuels, forestry, and environmental services, as well as greenhouse gas emissions, with and without second-generation biofuels technology. The difference in the discounted stream of global valuations of land-based goods and services gives the value of second-generation technology to society. Under baseline conditions, this to amounts to $64.2 billion at today's population or an increase of roughly 0.3 percent in the valuation of the world's land resources. This gain arises despite the fact that, in the baseline scenario, the technology does not become commercially viable until 2035. Alternative scenarios considered include: diminished crop yield growth owing to adverse climate impacts, flat energy prices, low economic growth, and high population growth, as well as greenhouse gas regulation. The most important factor driving second-generation valuation is greenhouse gas regulation, which more than doubles the social value of this technology. Flat energy prices essentially eliminate the value of second-generation technology to society, and high population growth reduces its value because of the heightened competition for land for food production.
    Keywords: Environmental Economics&Policies,Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy Production and Transportation,Energy and Environment
    Date: 2014–12–01
  4. By: Stanislao Gualdi; Marco Tarzia; Francesco Zamponi; Jean-Philippe Bouchaud
    Abstract: We generalise the stylised macroeconomic Agent-Based model introduced in "Tipping Points in Macroeconomic Agent Based Models" [JEDC 50, 29-61 (2015)], with the aim of investigating the role and efficacy of monetary policy of a 'Central Bank', that sets the interest rate such as to steer the economy towards a prescribed inflation and unemployment level. Our major finding is that provided its policy is not too aggressive (in a sense detailed in the paper) the Central Bank is successful in achieving its goals. However, the existence of different equilibrium states of the economy, separated by phase boundaries (or "dark corners"), can cause the monetary policy itself to trigger instabilities and be counter-productive. In other words, the Central Bank must navigate in a narrow window: too little is not enough, too much leads to instabilities and wildly oscillating economies. This conclusion strongly contrasts with the prediction of DSGE models.
    Date: 2015–01
  5. By: Ralf Brüggemann (Department of Economics, University of Konstanz, Germany); Markus Glaser (Institute for Capital Markets and Corporate Finance, Munich School of Management, Ludwig- Maximilians-Universität München, Germany); Stefan Schaarschmidt (Department of Economics, University of Konstanz, Germany); Sandra Stankiewicz (Department of Economics, University of Konstanz, Germany)
    Abstract: We investigate non-linearities in the stock return - trading volume relationship by using daily data for 16 European countries in an asymmetric vector autoregressive model. In this framework, we test for asymmetries and analyze the dynamic relationship using a simulation based procedure for computing asymmetric impulse response functions. We find that stock returns have a significant influence on trading volume, but there is no evidence for the influence of trading volume on returns. Our analysis indicates that responses of trading volume to return shocks are non-linear and the sign of the response depends on the absolute size of the shock. Thus, using linear VAR models may lead to wrong conclusions concerning the return - volume relationship. We also find that after stock markets go up (down), investors trade significantly more (less) in small and mid cap stocks, supporting evidence for the theories of overconfidence, market participation, differences of opinion, and disposition effect.
    Keywords: asymmetric vector autoregression, asymmetric impulse response functions, stock return, trading volume
    JEL: G12 G14 G17 C32
    Date: 2014–12–16
  6. By: Laurence Kotlikoff (Boston University); Jasmina Hasanhodzic (Boston University)
    Abstract: We calibrate and simulate 80, 40, and 20-period OLG models with aggregate shocks to assess generational risk. We overcome the curse of dimensionality by building on the Judd, Maliar, and Maliar algorithm, which limits a model's solution to its ergodic states, with no reliance on sparse grids, state-variable aggregation, or local approximations. We find that intrinsic generational risk is quite small, that government policies can produce generational risk, and that bond markets can share generational risk, including risks generated by policy. Our results hold with rare disasters, high risk aversion, persistent shocks, and stochastic depreciation.
    Date: 2014
  7. By: Arne Risa Hole (University of Sheffield); Hong Il Yoo (Durham University Business School, Durham University)
    Abstract: The maximum simulated likelihood estimation of random parameter logit models is now commonplace in various areas of economics. Since these models have non-concave simulated likelihood functions with potentially many optima, the selection of "good" starting values is crucial for avoiding a false solution at an inferior optimum. But little guidance exists on how to obtain "good" starting values. We advance an estimation strategy which makes joint use of heuristic global search routines and conventional gradient-based algorithms. The central idea is to use heuristic routines to locate a starting point which is likely to be close to the global maximum, and then to use gradient-based algorithms to refine this point further to a local maximum which stands a good chance of being the global maximum. In the context of a random parameter logit model featuring both scale and coefficient heterogeneity (GMNL), we apply this strategy as well as the conventional strategy of starting from estimated special cases of the final model. The results from several empirical datasets suggest that the heuristically assisted strategy is often capable of finding a solution which is better than the best that we have found using the conventional strategy. The results also suggest, however, that the configuration of the heuristic routines that leads to the best solution is likely to vary somewhat from application to application.
    Keywords: mixed logit, generalized multinomial logit, differential evolution, particle swarm optimization
    JEL: C25 C61
    Date: 2014–12
  8. By: Minas Vlassis (University of Crete); Stefanos Mamakis (Department of Economics, University of Crete, Greece)
    Abstract: In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementation of any possible policies of a benevolent social planner in the labour market. The applied policies may contradict or correspond with unions' and firms' objectives, while in other cases institutional arrangements of labour market appear to be inefficient to induce or deter FDI and thus social planner must search for alternative strategic devices. Given the complexity of the model, which must be solved computationally to obtain results, there are several outcomes depending on the values of the parameters.
    Keywords: Oligopoly, Cournot Duopoly, Labour Unions, Unionisation, Foreign Direct Investment, Endogenous Objectives
    JEL: J50 J51 L13 F21
    Date: 2014–12–03

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