nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒11‒21
eight papers chosen by

  1. Effects of Increases in Value Added Tax: A Dynamic CGE Approach By Jean Luc Erero
  2. The effect of project funding on innovative performance: An agent-based simulation model By Bogner, Kristina
  3. Banks, Market Organization, and Macroeconomic Performance: An Agent-Based Computational Analysis By Quamrul Ashraf; Boris Gershman; Peter Howitt
  4. Fiscal effects of the Norwegian pension reform. A micro-macro assessment By Dennis Fredriksen; Erling Holmøy; Birger Strøm; Nils Martin Stølen
  5. Possible Economic Outcomes of a Trade Agreement with the European Union By Knobel, Alexander; Chokaev, Bekhan
  6. Time varying fiscal multipliers in an agent-based model with credit rationing By Mauro Napoletano; Andrea Roventini; Jean-Luc Gaffard
  7. SLCGE-Tourism: A computable general equilibrium model of the Sri Lankan economy for tourism policy analysis By Sriyantha Fernando; Jayatilleke S Bandara; Christine Smith; Tien Pham
  8. Comparison of analytical approximation formula and Newton's method for solving a class of nonlinear Black-Scholes parabolic equations By Karol Duris; Shih-Hau Tan; Choi-Hong Lai; Daniel Sevcovic

  1. By: Jean Luc Erero
    Abstract: This paper analyses the effects of increases in value added tax (VAT) through a dynamic computable general equilibrium model. The database of the model encompasses a social accounting matrix (SAM) for the year 2010. All the important South African taxes are included in the SAM and the household sectors are disaggregated according to income deciles, with the top decile being further split into five groups. Five different simulations are performed, ranging from 1% increase in the VAT to 5% over the period 2012 to 2018. Our findings show that the percentage increase in VAT would not affect lower income households negatively if the higher government revenue flowed to the lower income households. For example, the 1% increase in the VAT rate impacts on the investment through the price of capital. The change in investment means that any adjustment in capital stock will affect the production and demand for labour that might impact on the standard of living of all income groups. The GDP increases slightly by 0.02173% in 2013 and reports a positive change for the period between 2013 and 2018. This shows that in the short run the GDP depends on other variables such as investment and consumption, which likewise are positively affected by this shock.
    Keywords: value added tax, computable general equilibrium model, South Africa
    JEL: C68 E62 H21
    Date: 2015
  2. By: Bogner, Kristina
    Abstract: Analyzing the effect of Direct Project Funding (DPF) on innovative performance of economic agents is a major challenge for innovation economists and policy makers who must give valid policy recommendations and decide on the allocation of financial resources. An approach that becomes more and more important is the use of agent-based modeling in analyzing innovative performance of market players. In this paper, an agentbased percolation model is used to investigate the effects of project funding on innovative performance in terms of the maximum technological frontier that can be reached as well as in terms of the number of innovations generated by firms. The model results show that firms which participate in subsidized projects outperform firms that do not participate in subsidized projects, especially in increasingly complex technological fields. However, the worse performance of firms that do not participate in subsidized projects can be offset by an increase in the firms' financial resources. Hence, the model indicates, the effect of project funding is a purely financial one and might even have negative effects on innovative performance. This is the case if, for instance, a high number of funded research projects disturbs firms' paths through the technology space. Following the results of the model, project funding is most effective and important in increasingly complex technology spaces and less effective and important in less complex technology spaces. Moreover, the model results show, other financial resources as venture capital can substitute for direct project funding.
    Keywords: project funding,innovation,technology space,agent-based simulation
    Date: 2015
  3. By: Quamrul Ashraf; Boris Gershman; Peter Howitt
    Abstract: This paper is an exploratory analysis of the role that banks play in supporting what Jevons called the "mechanism of exchange." It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the part of the Walrasian auctioneer, matching buyers with sellers and helping the economy to approximate equilibrium prices that no individual is able to calculate. Banks affect macroeconomic performance in this economy because their lending activities facilitate the entry and influence the exit decisions of trading firms. Both entry and exit have ambiguous effects on performance, and we resort to computational analysis to understand how they are resolved. Our analysis draws an important distinction between normal times and worst-case scenarios, in which the economy experiences systemic breakdowns. We show that banks provide a "financial stabilizer" that more than counteracts the familiar financial accelerator and that the stabilizing role of the banking system is particularly apparent in bad times. In line with this result, we also find that under less restrictive lending standards banks are able to more effectively improve macroeconomic performance in the worst-case scenarios.
    Keywords: Agent-based computational model, Market organization, Banking system, Macroeconomic stability, Financial stabilizer
    JEL: C63 E00 E63 G20 G28
    Date: 2015
  4. By: Dennis Fredriksen; Erling Holmøy; Birger Strøm; Nils Martin Stølen (Statistics Norway)
    Abstract: The main goal of the Norwegian pension reform of 2011 is to improve long run fiscal sustainability, not least through stronger labour supply incentives. We assess to what extent the reform is likely to live up to these intentions. To this end we combine a dynamic microsimulation model, which includes a complete description of the Norwegian population and the pension system, with CGE-modelling of the effects on all government revenues and expenditures. We find that the reform is likely to make a great fiscal impact in the long run, and higher employment plays an important role in this respect. However, the pension reform alone is far from enough to solve the Norwegians long run problem of fiscal sustainability.
    Keywords: Pension reforms; Fiscal sustainability; Income distribution; Computable general equilibrium model; Dynamic microsimulation
    JEL: H30 H55 H62 H68 O15
    Date: 2015–10
  5. By: Knobel, Alexander; Chokaev, Bekhan
    Abstract: This paper investigates the possible economic effects of Russia-EU free trade agreement, implying a mutual zero import tariffs in the trade of the Customs Union and the EU. Analysis of the effects is made using CGE Globe v1 model. We estimate the impact of an FTA on the economies, both at the level of the entire economy and at the industry level. The sensitivity analysis is made. It is shown that, in both relative and absolute terms, Russia potentially more benefits from the agree-ment than the EU. The cumulative gain of the CU is strictly positive, but the benefits and costs are unevenly distributed among its members, with negative effect for Belarus.
    Keywords: Customs Union,European Union,Free Trade Agreement,CGE
    JEL: C68 F15 F17
    Date: 2014
  6. By: Mauro Napoletano (OFCE); Andrea Roventini (Department of economics); Jean-Luc Gaffard (OFCE)
    Date: 2015–11
  7. By: Sriyantha Fernando; Jayatilleke S Bandara; Christine Smith; Tien Pham
    JEL: C68
    Date: 2015–06
  8. By: Karol Duris; Shih-Hau Tan; Choi-Hong Lai; Daniel Sevcovic
    Abstract: Market illiquidity, feedback effects, presence of transaction costs, risk from unprotected portfolio and other nonlinear effects in PDE based option pricing models can be described by solutions to the generalized Black-Scholes parabolic equation with a diffusion term nonlinearly depending on the option price itself. Different linearization techniques such as Newton's method and analytic asymptotic approximation formula are adopted and compared for a wide class of nonlinear Black-Scholes equations including, in particular, the market illiquidity model and the risk-adjusted pricing model. Accuracy and time complexity of both numerical methods are compared. Furthermore, market quotes data was used to calibrate model parameters.
    Date: 2015–11

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