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on Computational Economics |
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Issue of 2016‒05‒08
twelve papers chosen by |
| By: | Sónia Araújo; Dorothee Flaig |
| Abstract: | Brazil remains a fairly closed economy, with small trade flows relative to its share of world income. This paper explores the effects of three possible policy reforms to strengthen Brazil’s integration into global trade: a reduction in import tariffs, less local content requirements and a full zero-rating of exports in indirect taxes. A simulation analysis using the OECD Multi-Region Trade CGE model suggests that current policies are holding back exports, production and investment in Brazil. The model simulations suggest significant scope for trade policy reforms to strengthen industrial development and export competitiveness. Results also show that the expansion of investment and production would be accompanied by significant employment gains. Moreover, employment growth is higher for low-skilled occupations, implying that a major trade and tax policy reform aiming at liberalising trade flows would particularly help those at the lower end of the income distribution. L'impact de la libéralisation du commerce au Brésil : Modélisation EGC et simulations Le Brésil reste une économie relativement fermée, avec des flux commerciaux faibles par rapport à sa part dans le revenu mondial. Ce document examine les effets de trois reformes politiques qui permettraient au Brésil de renforcer son intégration dans le commerce mondial: une baisse des barrières tarifaires à l’importation, une réduction des exigences en contenu local et un taux zéro sur les impôts indirects pour les exportations. L’analyse de simulations utilisant le modèle EGC de commerce Multi-Régions de l'OCDE suggère que les politiques actuelles freinent les exportations, la production et l’investissement au Brésil. Les simulations du modèle suggèrent un rôle important pour des réformes de la politique commerciale visant à renforcer le développement industriel et la compétitivité des exportations. Les résultats suggèrent aussi que l'expansion de l’investissement et de la production serait accompagnée par des gains d’emplois significatifs. En outre, la croissance de l'emploi serait plus élevée pour les emplois peu qualifiés, ce qui implique qu’une réforme majeure des politiques commerciales et fiscales visant à libéraliser le commerce aiderait particulièrement les populations aux plus faibles revenus. |
| Keywords: | trade policy, CGE modelling, global value chains, politique commerciale, chaînes de valeur mondiales, Modélisation EGC |
| JEL: | F13 F47 F61 F62 F66 |
| Date: | 2016–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1295-en&r=cmp |
| By: | Sandrine Jacob Leal (CEREFIGE-ICN Business School (Nancy Metz) France); Mauro Napoletano (OFCE Sciences Po & SKEMA Business School) |
| Abstract: | We investigate the effects of different regulatory policies directed towards high-frequency trading (HFT) through an agent-based model of a limit order book able to generate flash crashes as the result of the interactions between low- and high-frequency (HF) traders. We analyze the impact of the imposition of minimum resting times, of circuit breakers (both ex-post and ex-ante types), of cancellation fees and of transaction taxes on asset price volatility and on the occurrence and duration of ash crashes. In the model, low- frequency agents adopt trading rules based on chronological time and can switch between fundamentalist and chartist strategies. In contrast, high-frequency traders activation is event-driven and depends on price fluctuations. In addition, high-frequency traders employ low-latency directional strategies that exploit market information and they can cancel their orders depending on expected profits. Monte-Carlo simulations reveal that reducing HF order cancellation, via minimum resting times or cancellation fees, or discouraging HFT via financial transaction taxes, reduces market volatility and the frequency of ash crashes. However, these policies also imply a longer duration of flash crashes. Furthermore, the introduction of an ex-ante circuit breaker markedly reduces price volatility and removes ash crashes. In contrast, ex-post circuit breakers do not affect market volatility and they increase the duration of flash crashes. Our results show that HFT-targeted policies face a trade-o between market stability and resilience. Policies that reduce volatility and the incidence of flash crashes also imply a reduced ability of the market to quickly recover from a crash. The dual role of HFT, as both a cause of the flash crash and a fundamental actor in the post-crash recovery underlies the above trade-off . |
| Keywords: | Hifgh frequency trading, Flash crashes, Regulatory policies, Agent based models, limit order book, Market volatility |
| JEL: | G12 G01 C63 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:16012&r=cmp |
| By: | Luisanna Cocco; Michele Marchesi |
| Abstract: | In January 3, 2009, Satoshi Nakamoto gave rise to the "Bitcoin Block Chain" creating the first block of the chain hashing on his computers central processing unit (CPU). Since then, the hash calculations to mine Bitcoin have been getting more and more complex, and consequently the mining hardware evolved to adapt to this increasing difficulty. Three generations of mining hardware have followed the CPU's generation. They are GPU's, FPGA's and ASIC's generations. This work presents an agent based artificial market model of the Bitcoin mining process and of the Bitcoin transactions. The goal of this work is to model the economy of the mining process, starting from GPU's generation, the first with economic significance. The model reproduces some "stylized facts" found in real time price series and some core aspects of the mining business. In particular, the computational experiments performed are able to reproduce the unit root property, the fat tail phenomenon and the volatility clustering of Bitcoin price series. In addition, under proper assumptions, they are able to reproduce the price peak at the end of November 2013, its next fall in April 2014, the generation of Bitcoins, the hashing capability, the power consumption, and the mining hardware and electrical energy expenses of the Bitcoin network. |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1605.01354&r=cmp |
| By: | Sandrine Jacob Leal; Mauro Napoletano |
| Abstract: | We investigate the effects of different regulatory policies directed towards high-frequency trading (HFT) through an agent-based model of a limit order book able to generate flash crashes as the result of the interactions between low- and high-frequency (HF) traders. We analyze the impact of the imposition of minimum resting times, of circuit breakers (both ex-post and ex-ante types), of cancellation fees and of transaction taxes on asset price volatility and on the occurrence and duration of flash crashes. In the model, low-frequency agents adopt trading rules based on chronological time and can switch between fundamentalist and chartist strategies. In contrast, high-frequency traders activation is event-driven and depends on price fluctuations. In addition, high-frequency traders employ low-latency directional strategies that exploit market information and they can cancel their orders depending on expected profits. Monte-Carlo simulations reveal that reducing HF order cancellation, via minimum resting times or cancellation fees, or discouraging HFT via financial transaction taxes, reduces market volatility and the frequency of flash crashes. However, these policies also imply a longer duration of flash crashes. Furthermore, the introduction of an ex-ante circuit breaker markedly reduces price volatility and removes flash crashes. In contrast, ex-post circuit breakers do not affect market volatility and they increase the duration of flash crashes. Our results show that HFT-targeted policies face a trade-off between market stability and resilience. Policies that reduce volatility and the incidence of flash crashes also imply a reduced ability of the market to quickly recover from a crash. The dual role of HFT, as both a cause of the flash crash and a fundamental actorin the post-crash recovery underlies the above trade-off. |
| Keywords: | High-frequency trading, Flash crashes, Regulatory policies, Agent-based models, Limit order book, Market volatility |
| Date: | 2016–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2016/15&r=cmp |
| By: | Kazuki Tomioka; Rod Tyers |
| Abstract: | This paper examines the contributions of foreign growth (particularly in China), on Japan's domestic economic performance and inequality. While the standard approach to external sources of inequality has emphasized transmission through trade and labor markets, here the emphasis is on financial flows. We begin by exploring this link using a three factor, three sector, two-region dynamic computable general equilibrium model (CGE), in which the regions are interlinked by both trade and financial flows. To provide an empirical perspective, a lag-augmented vector autoregression (LA-VAR) and a sign restricted vector autoregression (Sign restricted VAR) are estimated. We find convincing evidence through numerical simulations that strong growth in a near neighbor not only retards domestic performance but also raises home inequality. Empirical results suggest that growth in China has a significant delayed effect in aggravating Japanese inequality and its importance in explaining Japanese inequality increases in magnitude over time. |
| Keywords: | Japanese inequality, Foreign growth, Stagnation, Financial linkages, CGE, Lag augmented, Sign restriction, VAR. |
| JEL: | C32 C68 E25 F21 F41 F60 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2016-21&r=cmp |
| By: | Kollmann, Robert |
| Abstract: | This paper discusses a tractable approach for computing the likelihood function of non-linear Dynamic Stochastic General Equilibrium (DSGE) models that are solved using second- and third order accurate approximations. By contrast to particle filters, no stochastic simulations are needed for the method here. The method here is, hence, much faster and it is thus suitable for the estimation of medium-scale models. The method assumes that the number of exogenous innovations equals the number of observables. Given an assumed vector of initial states, the exogenous innovations can thus recursively be inferred from the observables. This easily allows to compute the likelihood function. Initial states and model parameters are estimated by maximizing the likelihood function. Numerical examples suggest that the method provides reliable estimates of model parameters and of latent state variables, even for highly non-linear economies with big shocks. |
| Keywords: | Likelihood-based estimation of non-linear DSGE models, higher-order approximations, pruning, latent state variables |
| JEL: | C6 E3 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70350&r=cmp |
| By: | Walter, Rico; Wirth, Martin; Lawrinenko, Alexander |
| Abstract: | For the basic problem of scheduling a set of n independent jobs on a set of m identical parallel machines with the objective of maximizing the minimum machine completion time---also referred to as machine covering---we propose a new exact branch-and-bound algorithm. Its most distinctive components are a different symmetry-breaking solution representation, enhanced lower and upper bounds, and effective novel dominance criteria derived from structural patterns of optimal schedules. Results of a comprehensive computational study conducted on benchmark instances attest to the effectiveness of our approach, particularly for small ratios of n to m. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:80530&r=cmp |
| By: | Sahrbacher, Christoph; Brady, Mark; Dong, Changxing; Sahrbacher, Amanda |
| Abstract: | An indicator of soil fertility is the content of organic matter measured by the share of carbon in the soil, which is negatively affected by many conventional land management practices. As those heavily depend on individual land use decisions, the agent-based model of regional structural change AgriPoliS is applied to assess carbon losses resulting from behaviors and interactions of individual farms. The extended model now considers nitrogen input and the development in soil’s carbon content. Three scenarios are implemented where farms have either to use 7%, 15% or 25% of their land as ecological focus area (EFA). Results show that although carbon losses continue at a slower pace under the 7%-scenario, 25% of the land is to be set aside to stop them completely. However this implies short-term income losses for farmers but better plant resistance and improved soil productivity in the long-run if soil organic matter can be maintained. |
| Keywords: | soil organic carbon, CAP, agent-based modelling., Environmental Economics and Policy, Land Economics/Use, Q24, Q18, C63, Q57., |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae15:212284&r=cmp |
| By: | Bernardo Alves Furtado; Isaque Daniel Eberhardt |
| Abstract: | Este texto simula a evolução de economias artificiais no intuito de compreender a relevância tributária de limites administrativos na qualidade de vida de seus habitantes. A modelagem consiste na construção de algoritmo computacional cujo desenho contemple cidadãos, organizados em famílias, assim como firmas e governos que interagem nos mercados de bens, de trabalho e imobiliário. O mercado imobiliário permite que as famílias se mudem para domicílios com maior qualidade ou menor preço quando capitalizam a valorização dos terrenos. O mercado de bens comporta a busca do consumidor em número flexível de firmas, escolhendo por preço e proximidade. O mercado de trabalho é dado por processo de pareamento entre firmas (dada sua localização e o salário ofertado) e candidatos, de acordo com sua qualificação. O governo pode se configurar em uma região única ou em quatro ou sete governos subnacionais distintos, porém conurbados economicamente. O papel do governo é coletar impostos sobre o valor de venda das firmas no seu território e aplicá-los na melhoria da qualidade de vida dos habitantes. Este texto apresenta algumas ilustrações realizadas a partir de uma economia aleatória. Nessa configuração os limites administrativos parecem ser relevantes para os níveis de qualidade de vida advinda da inversão dos tributos. Nesse caso, o recorte com sete regiões é mais dinâmico, porém mais desigual e heterogêneo entre as regiões. O recorte com região única é homogeneamente mais pobre. O trabalho busca contribuir como referência metodológica para descrever, operacionalizar e testar modelos computacionais de análise de finanças públicas, com viés explicitamente espacial e dinâmico. Várias alternativas de expansão do modelo para objetos de pesquisa próximos são relatadas. This study simulates the evolution of artificial economies in order to understand the tax relevance of administrative boundaries in the quality of life of its citizens. The modeling involves the construction of a computational algorithm, which includes citizens, bounded into families; firms and governments; all of them interacting in markets for goods, labor and real estate. The real estate market allows families to move to households with higher quality or lower price when the families capitalize property values. The goods market allows consumers to search on a flexible number of firms choosing by price and proximity. The labor market entails a matching process between firms (given its location and offered wage) and candidates, according to their qualification. The government may mbe configured into a single region, or four or seven distinct sub-national governments, which are all economically conurbated. The role of government is to collect taxes on the value added of firms in its territory and transform the taxes into higher levels of quality of life for residents. As an illustration of the model the text suggests that the configuration of administrative boundaries is relevant to the levels of quality of life arising from the reversal of taxes. The model with seven regions is more dynamic, but more unequal and heterogeneous across regions. The simulation with only one region is more homogeneously poor. The study seeks to contribute to a theoretical and methodological framework and to describe, operationalize and test computer models of public finance analysis, with explicitly spatial and dynamic emphasis. Several alternatives of expansion of the model for future research are described. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:2181&r=cmp |
| By: | Chen, Ching-mu; Kumagai, Satoru |
| Abstract: | A plan to construct a canal through the Kra Isthmus in Southern Thailand has been proposed many times since the 17th century. The proposed canal would become an alternative route to the over-crowded Straits of Malacca. In this paper, we attempt to utilize a Geographical Information System (GIS) to calculate the realistic distances between ports that would be affected by the Kra Canal and to estimate the economic impact of the canal using a simulation model based on spatial economics. We find that China, India, Japan, and Europe gain the most from the construction of the canal, besides Thailand. On the other hand, the routes through the Straits of Malacca are largely beneficial to Malaysia, Brunei, and Indonesia, besides Singapore. Thus, it is beneficial for all ASEAN member countries that the Kra Canal and the Straits of Malacca coexist and complement one another. |
| Keywords: | Asia, Thailand, Canals, Economic geography, Transportation, Kra Canal, Malacca Straits, GIS, Simulation model |
| JEL: | R13 R40 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper568&r=cmp |
| By: | Yu, Wusheng; Bandara, Jayatilleke S |
| Abstract: | This study evaluates the fiscal and welfare costs of India’s food policy during the 2007-08 global food crisis. India’s domestic grain price stabilization through consumer and producer subsidies and export restrictions is shown to have caused huge fiscal costs and equally large welfare costs, an outcome that is almost always the worst as compared to alternative policy mixes examined. While the most efficient and cost-effective alternatives may not be feasible due to political economy considerations, we argue that there exist some feasible and superior “middle-ground” policy mixes featuring partial relaxations of domestic subsidizations and/or less restrictive border policies. |
| Keywords: | India, food security policy, trade policy, agriculture subsidy, computable general equilibrium, Crop Production/Industries, Food Security and Poverty, International Development, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae15:211863&r=cmp |
| By: | Murphy, David (Bank of England); Vasios, Michalis (Bank of England); Vause, Nicholas (Bank of England) |
| Abstract: | The requirement to post initial margin on derivatives transactions is a key feature of the post-crisis reforms of the OTC derivatives markets. Initial margin requirements are usually determined by risk-based models. These models typically require increased margin in stressed conditions: they are procyclical. This procyclicality causes a liquidity burden on market participants which sometimes falls when they are least able to bear it. In this paper we study a variety of tools which have been proposed to mitigate the procyclicality of initial margin requirements. Three of these tools are proposed in European regulation; the other two are new proposals which offer attractive procyclicality mitigation features. The behaviour of all five tools is studied in a simulation framework. We examine the extent to which each tool mitigates procyclicality, and at what cost in demanding unnecessary margin compared to a benchmark unmitigated model. Our findings indicate that all of the tools are useful in mitigating procyclicality to some extent, but that the optimal calibration of each tool in a particular situation depends on the relative weights placed by the modeller on the objectives of minimizing procyclicality on the one hand and minimizing undesirable overmargining in periods of low volatility on the other. This suggests that it may be appropriate to consider moving from tools-based procyclicality regulation to one based on the desired outcomes. |
| Keywords: | Central counterparty; central clearing; initial margin; margin models; OTC derivatives; procyclicality |
| JEL: | G17 |
| Date: | 2016–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0597&r=cmp |