nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒05‒21
nineteen papers chosen by

  1. Agent-Based Model for River-Side Land-living: Portrait of Bandung Indonesian Cikapundung Park Case Study By Situngkir, Hokky
  2. Forecasting the Market Risk Premium with Artificial Neural Networks By Leoni Eleni Oikonomikou
  3. Tractable Likelihood-Based Estimation of Non-Linear DSGE Models Using Higher-Order Approximations By Robert Kollmann
  4. A Method for Agent-Based Models Validation By Mattia Guerini; Alessio Moneta
  5. Has Foreign Growth Contributed to Stagnation and Inequality in Japan? By Kazuki Tomioka; Rod Tyers
  7. Money supply expansion through a dynamic CGE model By C. Ciaschini; R. Pretaroli; F. Severini; C. Socci
  8. Gasto público, crecimiento económico y bienestar social bajo el efecto moderador del ahorro externo: la experiencia Mexicana By Roger Alejandro Banegas-Rivero; Andrés Blancas Neria
  9. Learning zero-cost portfolio selection with pattern matching By Tim Gebbie; Fayyaaz Loonat
  10. Is the market really a good teacher ? By Pascal Seppecher; Isabelle Salle; Dany Lang
  11. What role does climate change play in agricultural market uncertainty? An integrated assessment taking into account market-driven adjustments By Martinez, Pilar; Blanco, Maria; Van Doorslaer, Benjamin; Ramos, Fabien; Stanca, Lucian
  12. Demographics, Societal Aging, and Meat Consumption in China By Min, Shi; Bai, Junfei; Seale, James L. Jr.; Wahl, Thomas
  13. Political support for trade policy in the European Union By Daniel Rais
  14. Foreclosure Delay and the U.S. Labor Market By Herkenhoff, Kyle F.; Ohanian, Lee E.
  15. The antipoverty performance of universal and means-tested benefits with costly take-up By Alari Paulus
  16. Government Policies and Financial Crises: Mitigation, Postponement or Prevention? By Jakob Kapeller; Michael Landesmann; Franz X. Mohr; Bernhard Schütz
  17. Consumption Smoothing and Precautionary Saving under Recursive Preferences By AJ A. Bostian; Christoph Heinzel
  18. Population ageing and inflation with endogenous money creation By Igor Fedotenkov
  19. Non-take-up of student financial aid: A microsimulation for Germany By Herber, Stefanie P.; Kalinowski, Michael

  1. By: Situngkir, Hokky
    Abstract: A city park has been built from the organic urban settlement in the Cikapundung River, Bandung, Indonesia. While the aim for the development is the revitalization of the river for being unhealthy from the waste coming from the settlement. A study on how Indonesian people, in general, treating water source, like river, lake, and ocean is revisited. Throwing waste into the river has actually become paradox with the collective mental understanding about water among Indonesians. Two scenarios of agent-based simulation is presented, to see the dynamics of organic settlement and life of the city park after being opened for public. The simulation is delivered upon the imagery of landscape taken from the satellite and drone. While experience for presented problems gives insights, the computational social laboratory also awaits for further theoretical explorations and endeavors to sharpen good policymaking.
    Keywords: agent-based model, computational social science, settlement, slum, river, water, waste management, indonesia
    JEL: C63 C88 I31 Q1 Q25 Q53 Q57 R28 Z13 Z18
    Date: 2016–04–07
  2. By: Leoni Eleni Oikonomikou (Georg-August University Göttingen)
    Abstract: This paper aims to forecast the Market Risk premium (MRP) in the US stock market by applying machine learning techniques, namely the Multilayer Perceptron Network (MLP), the Elman Network (EN) and the Higher Order Neural Network (HONN). Furthermore, Univariate ARMA and Exponential Smoothing models are also tested. The Market Risk Premium is defined as the historical differential between the return of the benchmark stock index over a short-term interest rate. Data are taken in daily frequency from January 2007 through December 2014. All these models outperform a Naive benchmark model. The Elman network outperforms all the other models during the insample period, whereas the MLP network provides superior results in the out-of-sample period. The contribution of this paper to the existing literature is twofold. First, it is the first study that attempts to forecast the Market Risk Premium in a daily basis using Artificial Neural Networks (ANNs). Second, it is not based on a theoretical model but is mainly data driven. The chosen calculation approach fits quite well with the characteristics of ANNs. The forecasting model is tested with data from the US stock market. The proposed model-based forecasting method aims to capture patterns in the data that improve the forecasting accuracy of the Market Risk Premium in the tested market and indicates potential key metrics for investment and trading purposes for short time horizons.
    Keywords: nonlinear models; forecasting performance metrics; market risk premium; US equity market
    JEL: C45 C52 G15 G17
    Date: 2016–04–14
  3. By: Robert Kollmann
    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: C63 C68 E37
    Date: 2016–03
  4. By: Mattia Guerini (Institute of Economics, Scuola Superiore Sant'Anna, Pisa, Italy); Alessio Moneta (Institute of Economics, Scuola Superiore Sant'Anna, Pisa, Italy)
    Abstract: This paper proposes a new method to empirically validate simulation models that generate artificial time series data comparable with real-world data. The approach is based on comparing structures of vector autoregression models that are estimated from both artificial and real-world data by means of causal search algorithms. This relatively simple procedure is able to tackle both the problem of confronting theoretical simulation models with the data and the problem of comparing different models in terms of their empirical reliability. The paper also provides an application of the validation procedure to the Dosi et al. (2015) macro-model.
    Keywords: Models validation; Agent-Based models; Causality; Structural Vector Autoregressions
    JEL: C32 C52 E37
  5. By: Kazuki Tomioka (Business School, University of Western Australia); Rod Tyers (Business School, University of Western Australia and Centre for Applied Macroeconomic Analysis, Australian National University)
    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.
    Date: 2016
  6. By: Erhan Tonbul (Eskisehir Anadolu University, Turkey); Gamze Tuna (Eskisehir Anadolu University, Turkey); Nihal Erginel (Eskisehir Anadolu University)
    Abstract: Open vehicle routing problem (OVRP) is a special case of the well-known vehicle routing problem (VRP), which is one of the most popular optimization issues in transportation. In open vehicle problems, the ultimate goal is usually defined as finding the routes with the optimum costs, by means of fleet size and the travelled distance. Vehicles do not return to the depot after delivering their goods to the customer nodes. There is a classical approach of finding the shortest paths and minimum fleet size to solve these problems. However, most logistic companies are often interested in the load ratio of their vehicles as well. They expect their vehicles to take long distances with reasonable load ratios. For a vehicle to leave the big percentage of the load in the first delivery points and take the remaining much longer distance almost empty is an unwanted situation. In this study, a solution to the open vehicle routing problems is proposed from this perspective. To solve these kinds of NP-Hard problems, using metaheuristics is a fine way of obtaining good-enough solutions within reasonable time. In this study, a modified genetic algorithm is coded and a user-friendly decision support system is designed to solve this specific problem.
    Keywords: open vehicle routing, maximizing load ratio, transportation optimization, metaheuristics, modified genetic algorithm, crossover operators, hybrid metaheuristic, optimization, shortest path, minimum fleet size
    JEL: L91 L87
  7. By: C. Ciaschini (University of Macerata); R. Pretaroli (University of Macerata); F. Severini (University of Macerata); C. Socci (University of Macerata)
    Abstract: The ongoing economic stagnation and low inflation rates affecting EU have refuelled the debate on the role and the limits of monetary policy in pushing the economic growth. Given the tight margins for fiscal policy for EU state members, traditional and unconventional monetary policies are becoming more looked-for to break out of this condition. However, the main issue on whether the real or nominal aspects prevails still remains. In this situation, a framework able to identify and analyse any interaction between economic and financial flows becomes crucial to detect the dynamics pushing towards expansions or contractions resulting from monetary policies. Therefore, the aim of this paper is to investigate the direct and indirect impact of monetary policies implemented by the European Central Bank on the main Italian macroeconomic variables both in aggregate and disaggregate terms. For this purpose we use Dynamic Computable General Equilibrium model calibrated on the Social Accounting Matrix integrated with financial tools.
    JEL: C63 E17 E52 D57 D58
    Date: 2016–05
  8. By: Roger Alejandro Banegas-Rivero (Instituto de Investigaciones Económicas y Sociales 'José Ortiz Mercado' (IIES-JOM), Universidad Autónoma Gabriel René Moreno.); Andrés Blancas Neria (Instituto de investigaciones económicas (IIEC), Facultad de Economía. Universidad Nacional Autónoma de México.)
    Abstract: The aim of this paper is to evaluate the public spending effects on economic growth and social welfare in Mexico by means of a computable general equilibrium (CGE) model. It is used two alternative closure rules for foreign saving: 1) foreign saving is exogenous and restricted: saving determines investment, and 2) foreign saving is endogenous and unrestricted, investment determines saving. The results suggest that behavior of foreign saving (by two alternative closure rules) moderates the relationship between public spending and economic growth and social welfare with different effects (asymmetric) for various instruments of public spending. An increase in public spending –with unrestricted foreign saving--generates higher economic growth and greater social welfare, although fiscal balance and current account deficit become worse (postkeynesian approach). In absence of variations of foreign savings, government spending affects neither economic growth nor social welfare, only there is an imbalance fiscal stance (neoclassical stance).
    Keywords: Public spending, economic growth, social welfare, foreign saving, general equilibrium model.
    JEL: H50 H54 L38 O11 O23
    Date: 2016–04
  9. By: Tim Gebbie; Fayyaaz Loonat
    Abstract: We consider and extend the adversarial agent-based learning approach of Gy{\"o}rfi {\it et al} to the situation of zero-cost portfolio selection implemented with a quadratic approximation derived from the mutual fund separation theorems. The algorithm is applied to daily sampled sequential Open-High-Low-Close data and sequential intraday 5-minute bar-data from the Johannesburg Stock Exchange (JSE). Statistical tests of the algorithms are considered. The algorithms are directly compared to standard NYSE test cases from prior literature. The learning algorithm is used to select parameters for agents (or experts) generated by pattern matching past dynamics using a simple nearest-neighbour search algorithm. It is shown that there is a speed advantage associated with using an analytic solution of the mutual fund separation theorems. It is argued that the expected loss in performance does not undermine the potential application to intraday quantitative trading and that when transactions costs and slippage are considered the strategies can still remain profitable when unleveraged. The paper demonstrates that patterns in financial time-series on the JSE can be systematically exploited in collective but that this does not imply predictability of the individual asset time-series themselves.
    Date: 2016–05
  10. By: Pascal Seppecher (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - Université Sorbonne Paris Cité (USPC) - CNRS - Centre National de la Recherche Scientifique, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique); Isabelle Salle (CeNDEF - Center for Nonlinear Dynamics in Economics and Finance - Universiteit van Amsterdam, Utrecht School of Economics - Utrecht University [Utrecht]); Dany Lang (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - Université Sorbonne Paris Cité (USPC) - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper proposes to model market mechanisms as a collective learning process for firms in a complex adaptive system, namely Jamel, an agent-based, stock-flow consistent macroeconomic model. Inspired by Alchian's (1950) " blanketing shotgun process " idea, our learning model is an ever-adapting process that puts a significant weight on exploration vis-à-vis exploitation. We show that decentralized market selection allows firms to collectively adapt their overall debt strategies to the changes in the macroeconomic environment so that the system sustains itself, but at the cost of recurrent deep downturns. We conclude that, in complex evolving economies, market processes do not lead to the selection of optimal behaviors, as the characterization of successful behaviors itself constantly evolves as a result of the market conditions that these behaviors contribute to shape. Heterogeneity in behavior remains essential to adaptation in such an ever-changing environment. We come to an evolutionary characterization of a crisis, as the point where the evolution of the macroeconomic system becomes faster than the adaptation capabilities of the agents that populate it, and the so far selected performing behaviors suddenly cease to be, and become instead undesirable.
    Keywords: Evolutionary Economics,Learning,Firm adaptation
    Date: 2016–04–28
  11. By: Martinez, Pilar; Blanco, Maria; Van Doorslaer, Benjamin; Ramos, Fabien; Stanca, Lucian
    Abstract: Recent studies point to climate change being one of the long-term drivers of agricultural market uncertainty. To advance in the understanding of the influence of climate change on future agricultural market developments, we compare a reference scenario for 2030 with alternative simulation scenarios that differ regarding: (1) emission scenarios; (2) climate projections; and (3) the consideration of carbon fertilization effects. For each simulation scenario, the CAPRI model provides global and EU-wide impacts of climate change on agricultural markets. Results show that climate change would considerably affect agrifood markets up to 2030. Nevertheless, market-driven adaptation strategies (production intensification, trade adjustments) would soften the impact of yield shocks on supply and demand. As a result, regional changes in production would be lower than foreseen by other studies focused on supply effects.
    Keywords: Bio-economic modelling, Climate change, Agricultural market uncertainty, Food security, Agricultural and Food Policy, Environmental Economics and Policy, Food Security and Poverty, C55, Q11, Q13,
    Date: 2015
  12. By: Min, Shi; Bai, Junfei; Seale, James L. Jr.; Wahl, Thomas
    Abstract: Drawn on the data collected by surveying 1,340 urban households from 6 cities in China, this paper estimates the impacts of demographic structure and population aging on household meat consumption, by jointly considering meat consumed at-home and away-from-home. Based on the trajectories of population, a simple simulation on meat demand trend in China is conducted subsequently. The results suggest: 1) Meat consumed away-from-home averagely accounts for near 30% of household total meat consumption in terms of quantity, so that its omission likely leads to a significant underestimate of total meat consumption and misunderstanding the driving forces; 2) Population aging significantly and negatively affects per capita meat consumption, suggesting that the expected meat demand in China without considering population aging will be overestimated. The findings from this study have important implications for better understanding the relative issues on China’s meat consumption under the situation of population aging.
    Keywords: Food away from home, Meat consumption, Aging, China, International Development, Public Economics,
    Date: 2015
  13. By: Daniel Rais
    Abstract: Abstract We adopt the Stigler–Peltzman model of policy-making as developed by Hillman for application to the politics of international trade, in which the government is represented by a political support function trading-off the industry rents stemming from protection against the losses accruing to the general population. As a starting point, we examine the economic impact of actual government action as revealed by the structure of protection, backing out the weights implied by the marginal welfare effects of the set of EU import tariffs across sectors. We build on Tyers' application of methods to international trade employing a numerical general equilibrium model of the EU. This captures direct marginal effects of sector-level protection on protected industries, indirect effects on upstream and downstream industries, and the effect on overall welfare. We then deconstruct the revealed weighting pattern along the lines of industry nationality and related industry characteristics.
    Date: 2014–12–01
  14. By: Herkenhoff, Kyle F. (University of Minnesota); Ohanian, Lee E. (Federal Reserve Bank of Minneapolis)
    Abstract: The time required to complete a home foreclosure rose substantially during the Great Recession, due both to lender bottlenecks in processing foreclosures and to government policies intended to slow the foreclosure process. This paper shows that foreclosure delay had the unintentional benefit of giving unemployed homeowners additional time to search for high-paying jobs. {{p}} Our economic model analyzes foreclosure delay as equivalent to extending additional credit to unemployed homeowners that is paid back if the homeowners find jobs and fulfill their delinquent mortgage obligations before foreclosure is completed. Model simulations estimate that foreclosure delay during the recession improved the quality of new employment matches, raised national income by about 0.3 percent and increased homeownership by about 800,000 units.
    Date: 2016–05–03
  15. By: Alari Paulus
    Abstract: We assess the optimal design of transfers in the context of poverty alleviation and welfarist objectives. We extend the analytical framework of Creedy (1997) with costly benefit take-up - a common characteristics of means-tested schemes in par-ticular - to study how this affects the take-up of benefits and the optimal choice between means-tested and universal benefits. Numeric simulations reveal that take-up costs can increase social welfare and reduce poverty rates achieved with means-tested schemes by inducing people to increase their work effort. Universal benefits generally still outperform means-tested schemes on the basis of social welfare and poverty measures when these are adjusted for take-up costs.
    Keywords: optimal transfers, means-testing, take-up, poverty
    JEL: H21 H24 H31 I38
    Date: 2016–04
  16. By: Jakob Kapeller; Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Franz X. Mohr; Bernhard Schütz
    Abstract: Abstract In the aftermath of the Great Recession, governments have implemented several policy measures to counteract the collapse of the financial sector and the downswing of the real economy. Within a framework of Minsky-Veblen cycles, where relative consumption concerns, a debt-led growth regime and financial sector confidence constitute the main causes of economic fluctuations, we use computer simulations to assess the effectiveness of such measures. We find that the considered policy measures help to mitigate the impact of financial crises, though they do so at the cost of shortening the time between the initial financial crisis and the next. This result is due to an increase in solvency and confidence induced by the policy measures under study, which contribute to an increase in private credit and, thereby, increase effective demand. Our results suggest that without a strengthening of financial regulation any policy intervention remains incomplete.
    Keywords: financial crisis, financial regulation, fiscal policies, Minsky-Veblen cycles
    JEL: E32 E44 E62 E63 G01 G18 G28 H12 H81
    Date: 2016–05
  17. By: AJ A. Bostian; Christoph Heinzel
    Abstract: Intertemporal choices simultaneously activate discounting, risk aversion, and intertemporal substitution. Future risk stimulates, more specially, higher-order aspects of preference. While a vast empirical literature has studied discounting, risk preferences, and basic consumption smoothing, empirical knowledge of higher-order preferences is still scarce. Based on a two-period consumption/saving model, we investigate the interaction of risk and time preferences in intertemporal decisions with future risk. We show that the main carriers of saving variation in intertemporal decisions under risk, according to the model, are intertemporal preferences. Risk preferences only play a minor role. The predictions under Expected Utility (EU) resemble those of the intertemporal-substitution component of recursive utility, not the risk component. Our simulations also show that second- and third-derivative effects are the most essential features of preferences in the decisions in question. Effects already from the fourth order on have essentially no impact. While the risk effects under EU are stronger than under recursive preferences, the few-relevance result regarding third- and higher-order risk effects persists. For a deepened understanding of preferences underlying intertemporal choice, correctly identifying intertemporal preference seems to be the single most critical aspect. The quantitative differences in the predictions for EU and recursive preferences may allow to empirically discriminate between the preference concepts.
    JEL: D91 C90 D81
    Date: 2016–05
  18. By: Igor Fedotenkov (Bank of Lithuania)
    Abstract: This paper provides an explanation as to why population ageing is associated with deflationary processes. For this reason we create an overlapping-generations model (OLG) with money created by credits (inside money) and intergenerational trade. In other words, we combine a neoclassical OLG model with post-Keynesian monetary theory. The model links demographic factors such as fertility rates and longevity to prices. We show that lower fertility rates lead to smaller demand for credits, and lower money creation, which in turn causes a decline in prices. Changes in longevity affect prices through real savings and the capital market. Furthermore, a few links between interest rates and inflation are addressed; they arise in the general equilibrium and are not thoroughly discussed in literature. Long-run results are derived analytically; short-run dynamics are simulated numerically.
    Keywords: Population ageing, inflation, OLG model, inside money, credits
    JEL: E12 E31 E41 J10
    Date: 2016–02–23
  19. By: Herber, Stefanie P.; Kalinowski, Michael
    Abstract: This paper estimates the percentage of students who do not take up their federal need-based student financial aid entitlements and sheds light on determinants of this behavior. Against the background that educational mobility in Germany is low although extensive student financial aid for needy students is available, it is crucial to know whether students assert their claims for student aid at all. To investigate non-take-up, we set up a microsimulation model for the German Socio-Economic Panel Study 2002-2013 and estimate the respective aid amounts students would have received, had they filed an application for need-based aid. The results indicate that about 40% of the eligible low-income students do not take up their entitlements. We employ instrumental variable techniques and a sample selection model to consider several potential explanatory factors for this behavior. Our results suggest that non-take-up is inversely related to the level of benefits, though the elasticity is rather low. Apart from that, a shorter expected duration of benefit receipt is related to a higher non-take-up rate, whereas the possibility to draw upon older siblings' experience with completing the complex application for aid is associated with higher probabilities to claim. Moreover, we find robust evidence that significantly more students socialized in the former socialist East Germany choose to take up student aid than similar West German students. Finally, in line with behavioral economic theory, debt aversion of highly impulsive and impatient students is associated with higher rates of non-take-up.
    Keywords: non-take-up of social benefits,welfare program participation,federal student aid,student loans,microsimulation,behavioral economics,debt aversion,self-control
    JEL: I22 I23 I24 I38
    Date: 2016

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