nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒02‒11
ten papers chosen by

  1. Valuation Algorithms for Structural Models of Financial Interconnectedness By Johannes Hain; Tom Fischer
  2. A Macro CGE Model for the Colombian Economy By Andrés M. Velasco; Camilo A. Cárdenas Hurtado
  3. The potential growth impact of structural reforms in the EU. A benchmarking exercise By Janos Varga; Jan in 't Veld
  4. Estimating the Marginal Abatement Cost Curve of CO2 Emissions in China: Provincial Panel Data Analysis By Limin DU; Aoife Hanley; Chu WEI
  5. The Dynamics of Exploitation and Class in Accumulation Economies By Cogliano, Jonathan F.; Veneziani, Roberto; Yoshihara, Naoki
  6. Capital-embodied Technologies in CGE Models By James Lennox; Ramiro Parrado
  7. Weighted Elastic Net Penalized Mean-Variance Portfolio Design and Computation By Michael Ho; Zheng Sun; Jack Xin
  8. Transparency and deliberation within the FOMC: a computational linguistics approach By Stephen Hansen; Michael McMahon; Andrea Prat
  9. “Regional Forecasting with Support Vector Regressions: The Case of Spain” By Oscar Claveria; Enric Monte; Salvador Torra
  10. datanet: A Stata procedure to facilitate dataset organization for network analysis By Giovanni Cerulli; Antonio Zinilli

  1. By: Johannes Hain; Tom Fischer
    Abstract: Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural models of interconnected financial systems. However, beyond contagion research, these topics are also essential for risk-neutral pricing. In this article, we therefore study and compare valuation algorithms in the standard model of debt and equity cross-ownership which has crystallized in the work of several authors over the past one and a half decades. Since known algorithms have potentially infinite runtime, we develop a class of new algorithms, which find exact solutions in finitely many calculation steps. A simulation study for a range of financial system designs allows us to derive conclusions about the efficiency of different numerical methods under different system parameters.
    Date: 2015–01
  2. By: Andrés M. Velasco; Camilo A. Cárdenas Hurtado
    Abstract: This paper presents the construction of a tailor-made Macro Computable General Equilibrium Model for the Colombian economy that satisfies Banco de la República's macroeconomic programming and forecasting interests. Using information on the national accounts divulged by the National Statistics Department (DANE), we set an easily updatable Macro Social Accounting Matrix that serves as a starting point for the model parameters calibration and estimation.
    Keywords: Social Accounting Matrix, Computable General Equilibrium Models, Colombian Economy, Macroeconomic Programming.
    JEL: C67 C68 D57 D58
    Date: 2015–01–20
  3. By: Janos Varga; Jan in 't Veld
    Abstract: This paper presents a quantitative model-based assessment of the potential impact of structural reforms in the EU Member States. By comparing structural indicators of labour and product markets, a gap is defined for each indicator relative to the 3 best performers. Scenarios are then simulated in which half the gap vis-à-vis best performance is closed, to avoid setting unrealistic and/or unattainable targets. The simulations show large potential gains in output and employment, raising EU GDP by 3 % after five years and 6% after ten years. While competitiveness gains are smaller under simultaneous reforms, higher demand effects help to support growth in trading partners.
    JEL: C53 E10 F47 O20 O30 O41
    Date: 2014–12
  4. By: Limin DU; Aoife Hanley; Chu WEI
    Abstract: This paper estimates the Marginal Abatement Cost Curve (MACC) of CO2 emissions in China based on a provincial panel for the period of 2001-2010. The provincial marginal abatement cost (MAC) of CO2 emissions is estimated using a parameterized directional output distance function. Four types of model specifications are applied to fit the MAC-carbon intensity pairs. The optimal specification controlling for various covariates is identified econometrically. A scenario simulation of China’s 40-45 percent carbon intensity reduction based on our MACC is illustrated. Our simulation results show that China would incur a 559-623 Yuan/ton (roughly 51-57 percent) increase in marginal abatement cost to achieve a corresponding 40-45 percent reduction in carbon intensity compared to its 2005 level
    Keywords: CO2 Emissions; Marginal Abatement Cost Curve; Model Selection; China
    JEL: Q52 Q54 Q58
    Date: 2015–01
  5. By: Cogliano, Jonathan F.; Veneziani, Roberto; Yoshihara, Naoki
    Abstract: This paper analyses the equilibrium dynamics of exploitation and class in general accumulation economies with population growth, technical change, and bargaining by adopting a novel computational approach. First, the determinants of the emergence and persistence of exploitation and class are investigated, and the role of labour-saving technical change and, even more importantly, power is highlighted. Second, it is shown that the concept of exploitation provides the foundations for a logically coherent and empirically relevant analysis of inequalities and class relations in advanced capitalist economies. An index that identi es the exploitation level, or intensity of each individual can be de ned and its empirical distribution studied using the standard tools developed in the theory of inequality measurement.
    Keywords: Exploitation, class, accumulation, simulation
    JEL: B51 D63 C63
    Date: 2014–12
  6. By: James Lennox (Fondazione Eni Enrico Mattei); Ramiro Parrado (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici)
    Abstract: Computable general equilibrium (CGE) models are widely used to analyse macroeconomic and sectoral effects of climate policies. Developing new and improving existing carbon-free energy technologies will be crucial to limit the long-term economic costs of mitigation policies. Such technologies are largely embodied in capital goods; yet conventionally structured CGE models cannot capture capital-embodiment of sector-specific technologies. In this paper, we clarify the conceptual nature of the capital embodiment problem in multisector CGE models. Aggregating productive sectors and investment goods eliminates channels whereby specific technological changes are embodied in specific capital stocks. Nevertheless, capital-embodiment of sector-specific Hicks-neutral technical changes can be directly represented as investment-specific technical change (ISTC)
    Keywords: Climate Change Mitigation, Capital-Embodiment, Technological Change, CGE Models
    JEL: O33 O44 Q54 Q55 Q58
    Date: 2015–01
  7. By: Michael Ho; Zheng Sun; Jack Xin
    Abstract: It is well known that the out-of-sample performance of Markowitz's mean-variance portfolio criterion can be negatively affected by estimation errors in the mean and covariance. In this paper we address the problem by regularizing the mean-variance objective function with a weighted elastic net penalty. We show that the use of this penalty can be motivated by a robust reformulation of the mean-variance criterion that directly accounts for parameter uncertainty. With this interpretation of the weighted elastic net penalty we derive data driven techniques for calibrating the weighting parameters based on the level of uncertainty in the parameter estimates. We test our proposed technique on US stock return data and our results show that the calibrated weighted elastic net penalized portfolio outperforms both the unpenalized portfolio and uniformly weighted elastic net penalized portfolio. This paper also introduces a novel Adaptive Support Split-Bregman approach which leverages the sparse nature of $\ell_{1}$ penalized portfolios to efficiently compute a solution of our proposed portfolio criterion. Numerical results show that this modification to the Split-Bregman algorithm results in significant improvements in computational speed compared with other techniques.
    Date: 2015–02
  8. By: Stephen Hansen; Michael McMahon; Andrea Prat
    Abstract: How does transparency, a key feature of central bank design, affect the deliberation of monetary policymakers? We exploit a natural experiment in the Federal Open Market Committee in 1993 together with computational linguistic models (particularly Latent Dirichlet Allocation) to measure the effect of increased transparency on debate. Commentators have hypothesized both a beneficial discipline effect and a detrimental conformity effect. A difference-in-differences approach inspired by the career concerns literature uncovers evidence for both effects. However, the net effect of increased transparency appears to be a more informative deliberation process.
    Keywords: monetary policy; deliberation; FOMC; transparency; career concerns
    JEL: D78 E52 E58
    Date: 2014–06
  9. By: Oscar Claveria (Department of Econometrics. University of Barcelona); Enric Monte (Department of Signal Theory and Communications. Polytechnic University of Catalunya.); Salvador Torra (Department of Econometrics & Riskcenter-IREA. Universitat de Barcelona)
    Abstract: This study attempts to assess the forecasting accuracy of Support Vector Regression (SVR) with regard to other Artificial Intelligence techniques based on statistical learning. We use two different neural networks and three SVR models that differ by the type of kernel used. We focus on international tourism demand to all seventeen regions of Spain. The SVR with a Gaussian kernel shows the best forecasting performance. The best predictions are obtained for longer forecast horizons, which suggest the suitability of machine learning techniques for medium and long term forecasting.
    Keywords: Forecasting, support vector regressions, artificial neural networks, tourism demand, Spain JEL classification: C02, C22, C45, C63, E27, R11
    Date: 2015–01
  10. By: Giovanni Cerulli (CNR-CERIS National Research Council of Italy, Unit of Rome); Antonio Zinilli (CNR-CERIS National Research Council of Italy, Unit of Rome)
    Abstract: In recent years, much interest has focused on network analysis. This study presents and applies to real data a new user-written Stata command called datanet, which facilitates the dataset organization for the purpose of network analysis. Given a fixed number of units (or nodes) belonging to the same group (there will be a variable denoting group membership) and possibly connected to each other, this routine creates a new dataset containing all their possible couplings, which can be easily exploited with Stata network analysis’ commands. To our knowledge, no routine has been developed in Stata so far that executes this type of procedure. Moreover, this presentation will also review how to perform some basic network analysis in Stata and discuss further network analysis’ applications we deem of worth developing in Stata in the near future.
    Date: 2014–11–13

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.