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on Computational Economics |
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Issue of 2016‒08‒21
thirteen papers chosen by |
| By: | Schmitt, Noemi; Westerhoff, Frank |
| Abstract: | We propose a novel agent-based financial market framework in which speculators usually follow their own individual technical and fundamental trading rules to determine their orders. However, there are also sunspot-initiated periods in which their trading behavior is correlated. We are able to convert our (very) simple large-scale agent-based model into a simple small-scale agent-based model and show that our framework is able to produce bubbles and crashes, excess volatility, fattailed return distributions, serially uncorrelated returns and volatility clustering. While lasting volatility outbursts occur if the mass of speculators switches to technical analysis, extreme price changes emerge if sunspots coordinate temporarily the behavior of speculators. |
| Keywords: | financial markets,stylized facts,agent-based models,technical and fundamental analysis,heterogeneity and coordination,sunspots and extreme events |
| JEL: | C63 D84 G15 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:111&r=cmp |
| By: | Jacob, Jonathan; Buer, Tobias |
| Abstract: | A coalition of freight carriers is considered which has to decide how to allocate a pool of transport requests among its members. The literature is aware of a number of solution approaches which usually assume truthful behavior of the freight carriers. However, the used negotiation protocols are mostly not proven to enforce truthful behavior. This paper gives some insights into the impact of non-truthful behavior via computational experiments. We solve the collaborative problem via a genetic algorithm (GA) which is operated by an auctioneer. The GA’s individu- als are allocations of requests to carriers. To calculate the fitness of an individual, the carriers bid on the allocations. Bidding below a carrier’s true valuation could ceteris paribus increase its profits. However, understated valuations can influence the search process negatively, in particular when a favoured allocation is dismissed wrongly. It is shown via computational experiments that for six tested instances, bidding non-truthfully is individually, but not collectively, rational and results in a kind of prisoner’s dilemma. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bclgwp:3&r=cmp |
| By: | Christoph Böhringer (University of Oldenburg, Department of Economics); Xaquin Garcia-Muros (Basque Centre for Climate Change (BC3), Bilbao, Spain); Ignacio Cazcarro (Basque Centre for Climate Change (BC3), Bilbao, Spain); Iñaki Arto (Basque Centre for Climate Change (BC3), Bilbao, Spain) |
| Abstract: | Despite recent achievements towards a global climate agreement, climate action to reduce greenhouse gas emissions remains quite heterogeneous across countries. Energy-intensive and trade-exposed (EITE) industries in industrialized countries are particularly concerned on stringent domestic emission pricing that may put them at a competitive disadvantage with respect to producers of similar goods in other countries without or only quite lenient emission regulation. This paper focuses on climate policy analysis for the United States of America (US) and compares the economic implications of four alternative protective measures for US EITE industries: (i) output-based rebates, (ii) exemptions from emission pricing, (iii) energy intensity standards, and (iv) carbon intensity standards. Based on simulations with a large-scale computable general equilibrium model for the global economy we quantify how these protective measures affect competitiveness of US EITE industries. We find that while protective measures can attenuate adverse competitiveness impacts measured in terms of common sector-specific competitiveness indicators, they run the risk of making US emission reduction much more costly than uniform emission pricing stand-alone. In fact, the cost increase is associated with negative income effects such that the gains of protective measures for EITE exports may be more than compensated through losses in domestic EITE demand. |
| Keywords: | Unilateral climate policy; competitiveness; computable general equilibrium |
| JEL: | D21 H23 D58 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:old:dpaper:392&r=cmp |
| By: | Crowley, Patrick M.; Hudgins, David |
| Abstract: | This paper uses wavelet-based optimal control to simulate fiscal and monetary strategies under different levels of policy restrictions. The model applies the Maximal Overlap Discrete Wavelet Transform (MODWT) to United States quarterly GDP data, and then uses the decomposed variables to build a large 80 dimensional state-space linear-quadratic tracking model. Using a political targeting design for the frequency range weights, we simulate jointly optimal fiscal and monetary policy where: (1) both fiscal and monetary policy are dually emphasized, (2) fiscal policy is unrestricted while monetary policy is restricted to achieving a steady increase in the market interest rate, and (3) only monetary policy is relatively active, while fiscal spending is restricted to achieving a target growth rate. The results show that fiscal policy must be more aggressive when the monetary authorities are not accommodating the fiscal expansion, and that the dual-emphasis policy leads a series of interest rate increases that are balanced between a steadily increasing target and a low, fixed rate. This research is the first to construct integrated fiscal and monetary policies in an applied wavelet-based optimal control setting using U.S. data. |
| Keywords: | fiscal policy, linear-quadratic, monetary policy, optimal tracking control, discrete wavelet analysis |
| JEL: | C49 C61 C63 C88 E58 E61 |
| Date: | 2016–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2016_021&r=cmp |
| By: | Elena Jarocinska; Anna Ruzik-Sierdzinska |
| Abstract: | This paper analyses the distributional effects of the Polish old-age pension reform introduced in 1999. Following a benchmark Mincer earnings equation, and using a newly developed microsimulation model we project future pension benefits for males born in years 1969–1979. We find that inequality of predicted first pension benefits measured by the Gini coefficient increases from 0.119 to 0.165 for cohorts of men retiring between 2036 and 2046. The observed increased inequality of pension benefits is due to the decreasing share of initial capital that is based on a more generous DB formula in the total accumulated pension capital. At the same time, inequality in replacements rates decreases due to a stronger link between contributions paid through the entire working life and pension benefits. |
| Keywords: | pension benefits, inequality, replacement rates, microsimulation |
| JEL: | H55 J26 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:sec:cnstan:0482&r=cmp |
| By: | Vasilev, Aleksandar |
| Abstract: | This paper utilizes an otherwise standard micro-founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism to assess the magnitude of VAT evasion. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2014), as one of the very few countries in Europe with a non-differentiated consumption tax rate, and an economy where VAT revenue makes almost half of total government tax revenue. A computational experiment performed within this setup estimates that on average, the size of evaded VAT is a bit more than one-fourth of output, an estimate which is in line with the figures provided in both Philip (2014) and the European Commission (2014). In addition, model-based simulations suggest that increases in spending on law and order could generate substantial welfare gains by decreasing VAT evasion. |
| Keywords: | VAT evasion,general equilibrium,Bulgaria |
| JEL: | D58 E26 H26 K42 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:144817&r=cmp |
| By: | Deborshee Sen; Ajay Jasra; Yan Zhou |
| Abstract: | Pricing options is an important problem in financial engineering. In many scenarios of practical interest, financial option prices associated to an underlying asset reduces to computing an expectation w.r.t.~a diffusion process. In general, these expectations cannot be calculated analytically, and one way to approximate these quantities is via the Monte Carlo method; Monte Carlo methods have been used to price options since at least the 1970's. It has been seen in Del Moral, P. \& Shevchenko, P.V. (2014) `Valuation of barrier options using Sequential Monte Carlo' and Jasra, A. \& Del Moral, P. (2011) `Sequential Monte Carlo for option pricing' that Sequential Monte Carlo (SMC) methods are a natural tool to apply in this context and can vastly improve over standard Monte Carlo. In this article, in a similar spirit to Del Moral, P. \& Shevchenko, P.V. (2014) `Valuation of barrier options using sequential Monte Carlo' and Jasra, A. \& Del Moral, P. (2011) `Sequential Monte Carlo for option pricing' we show that one can achieve significant gains by using SMC methods by constructing a sequence of artificial target densities over time. In particular, we approximate the optimal importance sampling distribution in the SMC algorithm by using a sequence of weighting functions. This is demonstrated on two examples, barrier options and target accrual redemption notes (TARN's). We also provide a proof of unbiasedness of our SMC estimate. |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1608.03352&r=cmp |
| By: | Attinasi, Maria-Grazia; Prammer, Doris; Stähler, Nikolai; Tasso, Martino; Van Parys, Stefan |
| Abstract: | Budget-neutral tax wedge reductions rank high in the policy agenda of several EMU member states. Using a New Keynesian DSGE model of a monetary union with a complex labour market structure and a comprehensive public sector, we evaluate the macroeconomic and welfare effects of reducing the firms' and workers' labour tax rates under alternative financing instruments. Overall, a tax wedge reduction is beneficial in terms of both welfare and output, as long as the financing measure does not harm private-sector productivity and/or the incentive for private capital investments over-proportionately. While financing the labour tax wedge reduction by an increase in consumption taxation yields most favourable output effects, financing it by a reduction in government spending is more beneficial in terms of welfare as the latter does not imply a policy-induced increase in private consumption costs. We also show that, when we assume that firms can adjust the ex- and intensive labour margin in response to policy changes, a reduction in the workers' and not the firms' burden is most beneficial. |
| Keywords: | Fiscal Policy,Tax Reforms,DSGE Modelling,Macroeconomics |
| JEL: | H2 J6 E32 E62 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:262016&r=cmp |
| By: | Hirte, Georg; Tscharaktschiew, Stefan |
| Abstract: | The transport and urban economics literature applies different labor supply approaches when studying economic or planning instruments. Some studies assume that working hours are endogenous while the number of workdays is given, whereas others model only decisions on workdays. Unfortunately, empirical evidence does hardly exist on account of missing data. Against this background, we provide an assessment of whether general effects of transport policies are robust against the modeling of leisure demand and labor supply. We introduce different labor supply approaches into a spatial general equilibrium model and discuss how they affect the welfare implication of congestion policies. We, then, perform simulations and find that in many cases the choice of labor supply modeling not only affects the magnitude of the policy impact but also its direction. While planning instruments are suggested to be quite robust to different labor supply approaches, the way of modeling labor supply may crucially affect the overall welfare implications of economic instruments such as congestion tolls. Based on these findings it becomes clear which labor supply approach is the most appropriate given specific conditions. Our study also emphasizes the need for better micro labor market data that also feature days of sickness, overtime work used to reduce workdays, the actual number of leave days, part-time work, days with telecommuting etc. |
| Keywords: | Public Economics,Tax Efficiency,Time Allocation,Labor Supply,Pigouvian,Tax,Environmental Economics,Urban Economics,Spatial Economics,Regional Welfare,Land-Use,Zoning,CGE,Spatial Economics,Spatial Modeling,Transportation |
| JEL: | H2 H3 J22 Q5 R1 R4 R5 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuddps:0115&r=cmp |
| By: | Herr, A.; Saric, A. |
| Abstract: | We analyze the welfare effects of single rooms in German nursing homes using a large panel dataset containing information on prices, residents, and facility characteristics for the years 2007 and 2009. We estimate a one-level nested logit model of demand and, based on the model of bargaining between payers and providers, recover the marginal costs and markups. We then analyze a counterfactual scenario under which only single rooms are offered. According to our estimates, if no corresponding total capacity changes occur, this policy increases consumer surplus by 1.8% and providers’ variable profits by 5.1%. However, under the scenario of reduced capacities, where double rooms are simply transformed into single rooms, consumer surplus decreases by 6.6% and providers’ variable profits by 16.2%. To ensure the positive welfare effects of a single room policy, the supply of nursing home places must be secured by investing in new facilities. |
| Keywords: | single rooms; nursing homes; policy simulation; structural models; bargaining; |
| JEL: | I11 I18 L13 L51 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:16/23&r=cmp |
| By: | Adrien Genin; Peter Tankov |
| Abstract: | We develop generic and efficient importance sampling estimators for Monte Carlo evaluation of prices of single- and multi-asset European and path-dependent options in asset price models driven by L\'evy processes, extending earlier works which focused on the Black-Scholes and continuous stochastic volatility models. Using recent results from the theory of large deviations on the path space for processes with independent increments, we compute an explicit asymptotic approximation for the variance of the pay-off under an Esscher-style change of measure. Minimizing this asymptotic variance using convex duality, we then obtain an easy to compite asymptotically efficient importance sampling estimator of the option price. Numerical tests for European baskets and for Asian options in the variance gamma model show consistent variance reduction with a very small computational overhead. |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1608.04621&r=cmp |
| By: | Rodrigues, Joao; Thurlow, James; Landman, Willem; Ringler, Claudia; Robertson, Richard D.; Zhu, Tingju |
| Abstract: | There is growing interest within the climate change and development community in using seasonal forecast information to reduce the losses to agriculture resulting from climate variability, especially within food-insecure countries. However, forecast systems are expensive to establish and maintain, and therefore gauging the potential economic return to investments in forecast systems is crucial. Most studies that evaluate seasonal forecasts focus on developed countries and/or overlook agriculture’s economywide linkages. Yet forecasts may be more valuable in developing regions such as East Africa, where climate is variable and agriculture has macroeconomic importance. We use computable general equilibrium and process-based crop models to estimate the potential economywide value of national seasonal forecast systems in Kenya, Malawi, Mozambique, Tanzania, and Zambia. Stochastic seasonal simulations produce value distributions for forecasts of varying accuracy and varying levels of farm coverage. A timely and accurate forecast adopted by all farmers generates average regional income gains of US$113 million per year. Gains are much higher during extreme climate events and are generally pro-poor. The forecast value falls when forecast skill and farm coverage decline. National economic and trading structures, including the importance of agricultural exports, are found to be major determinants of forecast value. Economywide approaches are therefore needed to complement farm-level analysis when evaluating forecast systems in low-income agrarian economies. |
| Keywords: | EAST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, forecasting, climate change, modeling, economic value, mathematical models, general equlibrium, seasonal forecasts, stochastic modeling, D58 Computable and Other Applied General Equilibrium Models, Q15 Land Ownership and Tenure, Land Reform, Land Use, Irrigation, Agriculture and Environment, Q54 Climate, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1546&r=cmp |
| By: | Kai-Uwe Müller; Michael Neumann; Katharina Wrohlich |
| Abstract: | Since the millennium, the labor market participation of women and mothers is increasing across European countries. Several work/care policy measures underlie this evolution. At the same time, the labor market behavior of men and fathers, as well as their involvement in care work, is relatively unchanging, meaning that employed mothers are facing an increased burden with respect to gainful employment and providing care. We propose a family working time model that incentivizes fathers and mothers to both work in extended part-time employment. It provides a benefit in form of a lumpsum transfer or income replacement for each parent if, and only if, both parents work 30 hours per week. Thus, it explicitly addresses fathers and – contrary to most conventional family policies – actively promotes the dual earner/dual carer paradigm. Combining microsimulation and labor supply estimation, we empirically analyze the potential of the family working time model in the German context. The relatively small share of families already choosing the symmetric distribution of about 30 working hours would increase by 60 per cent. By showing that a lump-sum transfer especially benefits low-income families, we contribute to the debate about redistributive implications of family policies. The basic principles of the model generalize to other European countries where families increasingly desire an equal distribution of employment and care. In order to enhance the impact of such a policy, employers’ norms and workplace culture as well as the supply of high-quality childcare must catch-up with changing workforce preferences. |
| Keywords: | care work, gender equality, family policy, labor supply |
| JEL: | J22 J16 J38 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1603&r=cmp |