nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒09‒11
five papers chosen by

  1. Macro-Micro Models By John Cockburn; Luc Savard; Luca Tiberti
  2. Wealth distribution across communities of adaptive financial agents By Pietro DeLellis; Franco Garofalo; Francesco Lo Iudice; Elena Napoletano
  3. Kriging Metamodels for Bermudan Option Pricing By Michael Ludkovski
  4. SIMTASK: A Microsimulation model of the Slovak Tax-Benefit System By Zuzana Siebertova; Norbert Svarda; Jana Valachyova
  5. The macroeconomic effects of the Euro Area's fiscal consolidation 2011-2013: A Simulation-based approach By Rannenberg, Ansgar; Schoder, Christian; Strasky, Jan

  1. By: John Cockburn (Département d'économique, Université Laval); Luc Savard (Département d'économique, Université de Sherbrooke); Luca Tiberti (Département d'économique, Université Laval)
    Abstract: In this paper we review the joint macro-micro modeling framework. In the last twenty years, analysts have increasingly used computable general equilibrium (CGE) models jointly with microsimulation (MS) models to perform efficiency and distributive impact analysis. CGE models focus on macro and sectoral impact of policy reforms and they also capture general equilibrium effects of simulations. MS models focus on households of individuals’ behavior and are a key tool for distributional impact analysis. We detail the different approaches used and highlighting their advantages and disadvantages. We review the representative agent, the fully integrated, the top-down, bottom-up and iterative approaches.  Length: 27 pages
    Keywords: CGE model, microsimulation model, distributional impact analysis, poverty analysis
    JEL: C58 D58 D31 C81
    Date: 2015–08
  2. By: Pietro DeLellis; Franco Garofalo; Francesco Lo Iudice; Elena Napoletano
    Abstract: This paper studies the trading volumes and wealth distribution of a novel agent-based model of an artificial financial market. In this model, heterogeneous agents, behaving according to the Von Neumann and Morgenstern utility theory, may mutually interact. A Tobin-like tax on successful investments and a flat tax are compared to assess the effects on the agents' wealth distribution. We carry out extensive numerical simulations in two alternative scenarios: i) a reference scenario, where the agents keep their utility function fixed, and ii) a focal scenario, where the agents are adaptive and self-organize in communities, emulating their neighbours by updating their own utility function. Specifically, the interactions among the agents are modelled through a directed scale-free network to account for the presence of community leaders, and the herding-like effect is tested against the reference scenario. We observe that our model is capable of replicating the benefits and drawbacks of the two taxation systems and that the interactions among the agents strongly affect the wealth distribution across the communities. Remarkably, the communities benefit from the presence of leaders with successful trading strategies, and are more likely to increase their average wealth. Moreover, this emulation mechanism mitigates the decrease in trading volumes, which is a typical drawback of Tobin-like taxes.
    Date: 2015–05
  3. By: Michael Ludkovski
    Abstract: We investigate two new proposals for the numerical solution of optimal stopping problems within the Regression Monte Carlo (RMC) framework of Longstaff and Schwartz. First, we propose the use of stochastic kriging (Gaussian process) meta-models for fitting the continuation value. Kriging offers a flexible, nonparametric regression model that quantifies fit uncertainty and approximation quality. Second, we focus on the experimental design aspect of RMC, making connections to the Design of Experiments literature. We compare the performance of space-filling vs.~empirical density designs, and advocate the use of batching with replicated simulations at design sites to improve the signal-to-noise ratio. Numerical case studies for valuing Bermudan Puts under a variety of asset dynamics illustrate that our methods are competitive with existing approaches.
    Date: 2015–09
  4. By: Zuzana Siebertova (Council for Budget Responsibility); Norbert Svarda (Council for Budget Responsibility); Jana Valachyova (Council for Budget Responsibility)
    Abstract: In this paper we introduce a microsimulation model of the Slovak tax and transfer system SIMTASK. It presents a complex toolkit for static microsimulations. Compared to earlier version of the CBR microsimulation model, simulated results are closer to reality. This has been achieved by recalibrating sample weights of the input database, where the income distribution has been taken into account directly. The improved fit is documented by validating the tax and transfer aggregates using both the original sample weights and the new ones against external data. Along with some other refinements to the model and external data considerations, the paper concludes that the validity of SIMTASK improved in terms of personal income tax simulations, social security contributions simulations, as well as simulations of family related benefits.
    Keywords: microsimulation, EUROMOD, tax and benefit policy,Slovakia
    JEL: C81 I38 H24
    Date: 2015–08
  5. By: Rannenberg, Ansgar (Central Bank of Ireland); Schoder, Christian (Vienna University of Economics and Business); Strasky, Jan (Organisation for Economic Co-operation and Development)
    Abstract: Since 2010, fiscal policy in the Euro Area (EA) turned progressively more restrictive.According to estimates by the European Commission (2012), spending cuts and tax increases accumulated to about 4% of annual Euro Area GDP between 2011 and 2013.The switch to fiscal austerity has been associated with a return of the EA economy to recession. The role of the fiscal consolidation in driving the Euro Area's disappointing economic performance is uncertain and disputed. This paper gauges the impact of this policy employing variants of two DSGE models used for policy analysis by the ECB (the New Area Wide Model, NAWM) and the European Commission (QUEST III). We find that, first, the simulated effect of the Euro Area's fiscal consolidation strongly depends on one's view regarding the expected persistence of the measures anticipated by the agents. If agents believe the measures to be permanent, the consolidation might even have been expansionary due to strong riccardian effects. However, it is plausible to assume that households and firms did not expect the measures to be permanent, and have a finite horizon due to some degree of myopia. We operationalize these concerns by simulating the measures as very persistent but not permanent. In this scenario, which we treat as our baseline, GDP contracts in both models, with the cumulative multiplier of the fiscal consolidation amounting to 0.7 and 1.0 over the 2011-2013 period, respectively. The government debt-to-GDP ratio declines below the non-consolidation case only after one or three years. We then investigate the impact of two plausible enhancements of the degree of financial frictions in the models. First, we add a reasonably parameterised financial accelerator along the lines of Bernanke et al. (1999). As a result, the output contraction becomes considerably bigger. Second, we allow for a plausible crisis-related increase of the share of liquidity constrained households. With both of these enhancements, the debt-to-GDP ratio increases for 4 or 5 years relative to the non-consolidation case. The cumulative multiplier equals 1.3. These results would imply that, in our baseline scenario, fiscal consolidation is responsible for between one third (NAWM) and one half (QUEST III) of the decline of the Euro Area's output gap from the beginning of 2011 until the end of the EA's recent recession in 2013, with the share rising to about 80% in the presence of enhanced financial frictions. Moreover, most of the output costs of fiscal consolidation could have been avoided if it had been postponed until the zero lower bound constraint on monetary policy was no longer binding, and under such conditions the government debt-to-GDP ratio could have been reduced much more quickly.
    Keywords: Fiscal policy simulations, fiscal consolidation, fiscal multiplier, Euro Area
    JEL: E32 E62
    Date: 2015–08

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