nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒02‒28
seven papers chosen by
Stan Miles
Thompson Rivers University

  1. Clean Development Mechanism (CDM) as a funding opportunity for development: A macroeconomic CGE analysis of the Peruvian experience By Montaud, Jean-Marc ; Pécastaing, Nicolas
  2. Comonotonic Monte Carlo and its applications in option pricing and quantification of risk. By Alain Chateauneuf ; Mina Mostoufi ; David Vyncke
  3. Simulating micro behaviours and structural properties of knowledge networks: toward a “one size fits one” cluster policy By Joan Crespo ; Frédéric Amblard ; Jérôme Vicente
  4. Investment-specific vs Process Innovation in a CGE model of Environmental Policy By Claudio Baccianti ; Andreas Löschel
  5. ANN Model to Predict Stock Prices at Stock Exchange Markets By B. W. Wanjawa ; L. Muchemi
  6. Shifting Taxes from Labour to Property: A Simulation under Labour Market Equilibrium By Moscarola, Flavia Coda ; Colombino, Ugo ; Figari, Francesco ; Locatelli, Marilena
  7. Efficient Perturbation Methods for Solving Regime-Switching DSGE Models By Junior Maih

  1. By: Montaud, Jean-Marc ; Pécastaing, Nicolas
    Abstract: The Clean Development Mechanism (CDM) under the Kyoto Protocol constitutes a major tool in the fight against climate change; it is also an important foreign direct investment funding opportunity for Southern countries. Yet, few studies have focused on the economic impact of CDM on host countries. This study attempts such an assessment in Peru, using a computable general equilibrium (CGE) model that accounts for both the productive and regional dualism of the national economy. The numerical simulation of macroeconomic shocks generated by current and future CDM projects reveals the significant potential impact of such investments in terms of employment, growth, and regional imbalance in this developing country.
    Keywords: clean development mechanism,development,dualism,computable general equilibrium,Peru
    JEL: C68 O11 Q56
    Date: 2015
  2. By: Alain Chateauneuf (IPAG Business School et Centre d'Economie de la Sorbonne - Paris School of Economics ); Mina Mostoufi (Centre d'Economie de la Sorbonne - Paris School of Economics ); David Vyncke (Universiteit Gent )
    Abstract: Monte Carlo (MC) simulation is a technique that provides approximate solutions to a broad range of mathematical problems. A drawback of the method is its high computational cost, especially in a high-dimensional setting. Estimating the Tail Value-at-Risk for large portfolios or pricing basket options and Asian options for instance can be quite time-consuming. For these types of problems, one can construct an upper bound in the convex order by replacing the copula by the comonotonic copula. This comonotonic upper bound can be computed very quickly, but it gives only a rough approximation. In this paper we introduce the Comonotonic Monte Carlo (CoMC) simulation, which uses the best features of both approaches. By using the comonotonic approximation as a control variate we get more accurate estimates and hence the simulation is less time-consuming. The CoMC is of broad applicability and numerical results show a remarkable speed improvement. We illustrate the method for estimating Tail Value-at-Risk and pricing basket options and Asian options.
    Keywords: Control Variate Monte Carlo, Comonotonicity, Option pricing.
    JEL: G17 C02 C13 C15 C63
    Date: 2015–02
  3. By: Joan Crespo ; Frédéric Amblard ; Jérôme Vicente
    Abstract: The economic return of cluster policies has been recently called into question. Essentially based on a “one size fits all” approach consisting in boosting R&D collaborations and reinforcing network density in regions, cluster policies are suspected to have failed in reaching their objectives. The paper proposes to go back to the micro foundations of clusters in order to disentangle the links between the long run performance of clusters and their structural properties. We use a simple agent-based model to shed light on how individual motives to shape knowledge relationships can give rise to emerging structures with different properties, which imply different innovation and renewal capabilities. The simulation results are discussed in a micro-macro perspective, and the findings suggest reorienting cluster policy guidelines towards more targeted public-funded incentives for R&D collaboration.
    Keywords: cluster policy, networks, micro-behaviours, structural properties, agent-based model
    JEL: B52 O32 R12 Z13
    Date: 2015–02
  4. By: Claudio Baccianti ; Andreas Löschel
    Abstract: The European Union has implemented demand push and technology pull policies to foster innovation on the energy and resource efficiency of capital goods. The state of the art of general equilibrium modelling applied to environmental policy rarely treats product and process innovation separately and product quality is, in the best case, exogenous. We develop a dynamic multi-sector CGE model that distinguishes between R&D-based process innovation for all firms, endogenous product innovation in the capital good sector and adoption decisions with respect to the installation of new capital vintages in the rest of the economy. Our results support the previous literature in finding that aggregate innovation declines following an energy tax but whereas process innovation is reduced, product innovation actually rises. We find that demand pull policies are less effective than product-related R&D subsidies to reduce aggregate energy intensity.
    Keywords: Ecological innovation, Economic growth path, Industrial policy, Innovation, Innovation policy, Intangible assets, New technologies, Sustainable growth
    JEL: O31 O40 O41
    Date: 2015–02
  5. By: B. W. Wanjawa ; L. Muchemi
    Abstract: Stock exchanges are considered major players in financial sectors of many countries. Most Stockbrokers, who execute stock trade, use technical, fundamental or time series analysis in trying to predict stock prices, so as to advise clients. However, these strategies do not usually guarantee good returns because they guide on trends and not the most likely price. It is therefore necessary to explore improved methods of prediction. The research proposes the use of Artificial Neural Network that is feedforward multi-layer perceptron with error backpropagation and develops a model of configuration 5:21:21:1 with 80% training data in 130,000 cycles. The research develops a prototype and tests it on 2008-2012 data from stock markets e.g. Nairobi Securities Exchange and New York Stock Exchange, where prediction results show MAPE of between 0.71% and 2.77%. Validation done with Encog and Neuroph realized comparable results. The model is thus capable of prediction on typical stock markets.
    Date: 2014–12
  6. By: Moscarola, Flavia Coda (University of Turin ); Colombino, Ugo (University of Turin ); Figari, Francesco (University of Insubria ); Locatelli, Marilena (University of Turin )
    Abstract: A tax shifting from labour income to housing taxation is generally advocated on efficiency grounds. However, most of the empirical literature focuses on the distributional implications of property tax reforms without paying much attention to potential consequences on the labour market. The aim of this paper is to fill this gap by investigating the effects of a tax shifting from labour income to property, guaranteeing revenue neutrality, and to assess the consequences of labour market equilibrium, both on occupation rates and income distribution. We propose to consider a hypothetical tax reform in Italy which uses the revenue of the tax on house property (actually implemented in 2012) for increasing tax credits on low incomes and making them refundable. In order to evaluate the reform we have developed a structural model of household labour supply which takes into account the labour market equilibrium conditions. Overall, the simulated policy provides a more effective income support and better incentives to work for low wage households and determines an improvement in inequality indexes.
    Keywords: labour supply, tax shifting, personal tax on labour income, property tax, labour market equilibrium, microsimulation
    JEL: C35 C53 D31 J22 H31
    Date: 2015–02
  7. By: Junior Maih
    Abstract: In an environment where economic structures break, variances change, distributions shift, conventional policies weaken and past events tend to reoccur, economic agents have to form expectations over different regimes. This makes the regime-switching dynamic stochastic general equilibrium (RS-DSGE) model the natural framework for analyzing the dynamics of macroeconomic variables. We present efficient solution methods for solving this class of models, allowing for the transition probabilities to be endogenous and for agents to react to anticipated events. The solution algorithms derived use a perturbation strategy which, unlike what has been proposed in the literature, does not rely on the partitioning of the switching parameters. These algorithms are all implemented in RISE, a flexible object-oriented toolbox that can easily integrate alternative solution methods. We show that our algorithms replicate various examples found in the literature. Among those is a switching RBC model for which we present a third-order perturbation solution.
    Keywords: DSGE, Markov switching, Sylvester equation, Newton algorithm, perturbation, matrix polynomial
    Date: 2014–12

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