nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒08‒28
sixteen papers chosen by
Stan Miles
Thompson Rivers University

  1. Interbank network and regulation policies: an analysis through agent-based simulations with adaptive learning By Barroso, Ricardo Vieira; Lima, Joaquim Ignacio Alves Vasconcellos; Lucchetti, Alexandre Henrique; Cajueiro, Daniel Oliveira
  2. Impact of the Brexit: Firm Exit and Loss of Variety By Nobuhiro Hosoe
  3. Tradable Permits in Cost–Benefit Analysis. A Numerical Illustration By Johansson, Per-Olov
  4. RELARM: A rating model based on relative PCA attributes and k-means clustering By Elnura Irmatova
  5. QMM - A Quarterly Macroeconomic Model of the Icelandic Economy By Ásgeir Daníelsson; Bjarni G. Einarsson; Magnús F. Guðmundsson; Svava J. Haraldsdóttir; Thórarinn G. Pétursson; Signý Sigmundardóttir; Jósef Sigurðarson; Rósa Sveinsdóttir
  6. A three-phase heuristic for a multi-size container transport problem with partially specified requests By Nordsieck, Niklas; Buer, Tobias; Schönberger, Jörn
  7. Prospective External Shocks and Indonesian Economic Performance By Prayudhi Azwar; Rod Tyers
  9. An agent-based stock-flow consistent model of the sustainable transition in the energy sector By Ponta, Linda; Raberto, Marco; Teglio, Andrea; Cincotti, Silvano
  10. Model confirmation in climate economics By Antony Millner; Thomas K. J. McDermott
  11. How Narrowly Should Anti-poverty Programs Be Targeted? Simulation Evidence from Bolivia and Indonesia By Stephan Klasen; Simon Lange
  12. Sectoral Dynamics and Business Cycles By Tase, Manjola
  13. Marketplace Plan Payment Options for Dealing with High-Cost Enrollees By Timothy J. Layton; Thomas G. McGuire
  14. Estimating Path Dependence in Energy Transitions By Kyle C. Meng
  15. Brexit and the Finnish Economy By Lehmus, Markku; Suni, Paavo
  16. Continuous-time perpetuities and time reversal of diffusions By Constantinos Kardaras; Scott Robertson

  1. By: Barroso, Ricardo Vieira; Lima, Joaquim Ignacio Alves Vasconcellos; Lucchetti, Alexandre Henrique; Cajueiro, Daniel Oliveira
    Abstract: We develop an agent-based model to study the impacts of a broad range of regulation policies over the banking system. It builds on an iterated version of the \citet{DiamondDybvig1983} framework and resorts to the experience-weighted attraction learning scheme of \citet{CamererHo1999} to model agents' adaptive learning. Thereby, we can capture not only the direct impacts of regulation policies, but also the ones that take part through shifting agents' adaptive strategies. Our results show that the introduction of an interbank clearinghouse is a good instrument to face the risk of contagion; the regulatory guidelines of the Basel Accord are effective in reducing the probability of bank failure; and the adoption of a deposit insurance can be adequate to avoid bank runs. However, we also show that these policies have drawbacks, and can either reduce bank activity or stimulate moral hazard.
    Keywords: Interbank network, regulation, agent-based model, adaptive learning
    JEL: E58 G18 G2 G28
    Date: 2016–07–15
  2. By: Nobuhiro Hosoe (National Graduate Institute for Policy Studies, and Japan Science and Technology Agency)
    Abstract: ‰p ‘‚̉¢ B˜A ‡(European Union, EU)—£’E‚̉e‹¿‚ð2Ží—ނ̉ž—pˆê”Ê‹Ï t(computable general equilibrium, CGE)ƒ‚ƒfƒ‹?‹K–Í‚ÉŠÖ‚µ‚ÄŽûŠnˆê’è‚Ì ]—ˆŒ^ƒ‚ƒfƒ‹‚Æ AŠé‹Æ‚َ̈¿ «‚Æ‹K–Í‚ÌŒo Ï‚ð l—¶‚µ‚½MelitzŒ^‚̃‚ƒfƒ‹?‚ð—p‚¢‚Ä•ª Í‚·‚é BEU—£’EŒã‚É Ä Ý’è‚³‚ê‚é–fˆÕ á•Ç‚É‚æ‚Á‚Ä A‰p ‘‚Ɖp ‘ˆÈŠO‚ÌEU ” ‘ŠÔ‚Ì–fˆÕ‚Í‘å‚«‚­—Ž‚¿ ž‚Þ B‹K–Í‚ÉŠÖ‚µ‚ÄŽûŠnˆê’è‚̃‚ƒfƒ‹‚ð—p‚¢‚é‚Æ A‰p ‘‚͂킸‚©‚ÈŒo ÏŒú ¶ ã‚Ì—˜‰v A‚Ü‚½‚Í A‘¹Ž¸‚ð”í‚邱‚Æ‚ª—\‘z‚³‚ê‚邪 A‹K–Í‚ÌŒo Ï‚Ì‚ ‚郂ƒfƒ‹‚ð—p‚¢‚½ ê ‡‚É‚Í A–³Ž‹‚Å‚«‚È‚¢‹K–Í‚Ì‘¹Ž¸‚ª”­ ¶‚·‚邱‚Æ‚ª‚í‚©‚é B‚»‚Ì‘¹Ž¸‚Í A‰p ‘‚ªEU—£’E‚©‚瓾‚ç‚ê‚é•Ö‰v‚Ì’†‚Å‚Ì Å‘å‚ÆŠú‘Ò‚³‚ê‚Ä‚¢‚éEU‚Ö‚Ì à ­‹’ o‹à‚Ì‹àŠz‚Æ“¯’ö“x‚É’B‚·‚é B‰p ‘‚ÌŽY‹Æ‚Í A‚Æ‚­‚É‘@ˆÛ Eˆß—¿ A“S | E‹à‘® »•i AŽ©“®ŽÔ E—A‘—‹@ŠB•”–å‚É‚¨‚¢‚Ä A‘å‚«‚­—A o‚ðŒ¸‚ç‚·‚±‚Æ‚ð’Ê‚¶‚Ä ¶ŽY‚ðŒ¸ ­‚³‚¹‚é B
    Date: 2016–08
  3. By: Johansson, Per-Olov (CERE and HHS)
    Abstract: There are di fferent views with respect to the treatment of tradable permits for greenhouse gases in cost-benefi t analysis. This note aims at illustrating numerically within a simple general equilibrium model how to treat tradable permits in economic evaluations of projects. The note looks at a cost-benefi t rule for a large project providing a public good interpreted as a shortcut for infrastructure, using a fossil fuel and a renewable as inputs. The paper also evaluates a small or marginal project involving the same output and inputs. In addition, it illustrates the Samuelson condition for the optimal provision of the public good. The note is a supplement to CERE Working Paper No 2015:11 and SSE Working Paper in Economics No 2015:3. The model used here may also be useful in advanced courses to illustrate general equilibrium cost-benefi t analysis.
    Keywords: Cost{bene t analysis; greenhouse gases; tradable permits; general equilibrium; Samuelson condition; numerical illustration
    JEL: H21 H23 H41 H43 I30 L13
    Date: 2016–05–11
  4. By: Elnura Irmatova
    Abstract: Following widely used in visual recognition concept of relative attributes, the article establishes definition of the relative PCA attributes for a class of objects defined by vectors of their parameters. A new rating model (RELARM) is built using relative PCA attribute ranking functions for rating object description and k-means clustering algorithm. Rating assignment of each rating object to a rating category is derived as a result of cluster centers projection on the specially selected rating vector. Empirical study has shown a high level of approximation to the existing S & P, Moody's and Fitch ratings.
    Date: 2016–08
  5. By: Ásgeir Daníelsson; Bjarni G. Einarsson; Magnús F. Guðmundsson; Svava J. Haraldsdóttir; Thórarinn G. Pétursson; Signý Sigmundardóttir; Jósef Sigurðarson; Rósa Sveinsdóttir
    Abstract: This Handbook contains an updated version of the Quarterly Macroeconomic Model of the Central Bank of Iceland (qmm). qmm and the underlying quarterly database have been under construction since 2001 at the Research and Forecasting Division of the Economics and Monetary Policy Department at the Bank and was ?rst implemented in the forecasting round for the Monetary Bulletin 2006/1 in March 2006. qmm is used by the Bank for forecasting and various policy simulations and therefore plays a key role as an organisational framework for viewing the medium-term future when formulating monetary policy at the Bank. This paper is mainly focused on the short and medium-term properties of qmm. Steady state properties of the model are documented in a paper by Daníelsson (2009).
    Date: 2015–12
  6. By: Nordsieck, Niklas; Buer, Tobias; Schönberger, Jörn
    Abstract: The present paper studies a generalization of the less-than-truckload pickup and delivery problem. The problem at hand arises in the hinterland of container terminal where empty and loaded containers have to be transported between a container depot and a set of customer locations. However, requests including empty containers are only partially specified. That is, either the pickup location or the delivery location of a request including the transportation of an empty container is a priori known. Customers who demand an empty container do not care which specific empty container is provided, i.e., while the delivery location is given, the pickup location is part of the problem's solution. To solve this problem, an iterated three-phase heuristic is introduced. The first phase completes the partially specified requests, the second phase solves a standard pickup and delivery problem, the third phase changes parameters of the objective function and the process iterates. Computational results on a set of 1,000 test instances are presented.
    Date: 2016
  7. By: Prayudhi Azwar (Business School, University of Western Australia and Bank Indonesia); Rod Tyers (Business School, University of Western Australia and Centre for Applied Macroeconomic Analysis (CAMA) Crawford School of Government, Australian National University)
    Abstract: The post-GFC era sees slower global growth, unusually combined with lower investment financing costs, a substantial Chinese slowdown and with the eventual prospect of a US-led re-tightening of global financial markets. For Indonesia in the medium term, these developments imply a slowing of export growth and a temporary surge in net inward investment incentives. These changes are examined here using a numerical macro model. The results suggest that recent fiscal reform is long run beneficial and that it will moderate the negative effects of expectations linked to the eventual financial tightening. Indeed, results depend importantly on whether expectations are formed on the short run effects or the prospective tightening. Expectations retard growth in either case. Depending on magnitudes, the prospect of financial tightening may be preferable to nearer term financial easing that is combined with comparatively unattractive export moderation.
    Date: 2016
  8. By: Freddy Heylen; Pieter Van Rymenant; Brecht Boone; Tim Buyse (-)
    Abstract: This paper investigates the possibility of today’s OECD economies entering into a very long period of poor per capita economic growth and very low real interest rates. We construct a general equilibrium model with overlapping generations of heterogeneous individuals, differing in ability and human capital, and with genetic and financial transfers from parents to children. Our model allows to study within one coherent framework the effects of those factors that are most often mentioned in the literature as possible drivers of secular stagnation: demographic change, a slowdown in the rate of technical progress, rising inequality, borrowing constraints, and downward rigidity in the real interest rate. We calibrate our model to Belgium and find that its predictions match key facts in Belgium in 1950-2009 very well. We then simulate projected future changes in technical progress and demography. In alternative scenarios we additionally impose rising inequality, borrowing constraints and/or a lower bound to the real interest rate. When we assume unchanged public policies and a modest future rate of technical progress, our conclusions about future per capita output and growth are rather pessimistic. Demographic change is by far the most influential cause of low growth. If a lower bound to the real interest rate is binding, it could considerably aggravate the problem of stagnation.
    Keywords: secular stagnation, overlapping generations, economic growth, ageing, demography, inequality
    JEL: C68 D91 E17 J11 O40
    Date: 2016–08
  9. By: Ponta, Linda; Raberto, Marco; Teglio, Andrea; Cincotti, Silvano
    Abstract: Major structural changes to the current fossil-fuel based economic system are needed in order to address the climate change challenge. To this purpose, effective Renewable Energy Sources (RES) support policies, along with concrete efforts towards the improvement of energy efficiency, have been adopted in many countries. One of these policies is the feed-in-tariff (FiT) mechanism, according to which electricity produced by RES is sold at guaranteed prices (feed-in tariffs), which are higher than market ones, for fixed periods of time. In this paper, we investigate how to foster a sustainability transition of the energy system towards an economically and ecologically sustainable growth path by using an enriched version of the Eurace model. Eurace has been enriched by including an energy sector where electricity is demanded by domestic producers and is supplied by a fossil-fuel based power producer as well as a renewable-energy based one. Both power producers undertake pricing and capacity investment decisions based on the price of imported fossil fuel and feed-in tariff government policy. In particular, we investigate how the economy is affected by the fiscal costs of financing the feed-in tariff mechanism and by the benefits of lower fossil fuels imports, in order to devise the policy with the best cost-benefit trade-off for the macroeconomy as a whole. Results show that the feed-in-tariff policy is effective in fostering the sustainability transition of the energy sector and that it increases the level of investments in the economy with a slightly positive impact on the unemployment rates. Moreover, we observe that its financing costs do not impact government finances in a relevant way. On the other hand, the higher level of investments occurs at the expense of the production of consumption goods, therefore with a negative impact for the living standards, at least according to the perspective of a consumerist society. However, if factors like better employment rates and the reduced GHG emissions are also taken into account, along with consumption, by an appropriate preference function, the final outcome on well-being should be probably deemed as favourable.
    Keywords: sustainability transition, energy sector, feed-in tariff, agent-based modelling
    JEL: C63 Q01 Q42 Q43 Q56
    Date: 2016–08–18
  10. By: Antony Millner; Thomas K. J. McDermott
    JEL: J1
    Date: 2016–07–18
  11. By: Stephan Klasen (Georg-August University Göttingen); Simon Lange (Georg-August University Göttingen)
    Abstract: A key question in the design of anti-poverty programs is to what extent they should be targeted. Empirical evaluations of targeted transfer schemes and simulation exercises often point to further gains that can be had from targeted transfers vis-à-vis universal transfers or from more narrow targeting. Theoretical work, on the other hand, has identified hidden costs associated with targeting - including politico-economic constraints on budgets - but these are frequently ignored in empirical work. In this paper we first argue that common targeting measures can be interpreted as preferences that attach specific weights to true and false positive rates. Based on data from Bolivia and Indonesia, we show that targeting based on an imperfect poverty classifier based on proxy means tests results in very distinct 'optimal' beneficiary shares when these measures are used as a decision criterion. Implications from poverty simulations are sensitive to assumptions about the political economy relationship between the beneficiary share and the available budget. In fact, in many situations, optimizing targeting measures will be misleading when the actual goal is to maximize the effect on poverty.
    Keywords: welfare and poverty measurement; targeting; transfers; social assistance; proxy means tests; poverty; Bolivia; Indonesia
    JEL: C52 I38 O21
    Date: 2016–08–22
  12. By: Tase, Manjola
    Abstract: I construct an index of sectoral dynamics to characterize changes in the sectoral composition of economic activity. There is evidence of asymmetry in different phases of business cycles with recessions being associated with larger changes in sectoral composition than expansions. I find that the correlation between dynamics in sectoral employment and aggregate output has weakened since the 1990s. Also, sectoral changes appear to be smaller and spread across more sectors, while their contribution to aggregate volatility has been increasing. I also perform a simulation exercise and replicate these documented facts. The results suggest that shifts in the sectoral composition of the economy likely contribute to the formation of business cycles. Also the duration of recessions implied by the impulse response functions from a VAR model of sectoral dynamics and aggregate output growth matches the duration of recessions observed in the data.
    Keywords: Structural changes ; Business cycles ; Labor share ; Employment
    JEL: E32 E24
    Date: 2016–07–20
  13. By: Timothy J. Layton; Thomas G. McGuire
    Abstract: Two of the three elements of the ACA’s “premium stabilization program,” reinsurance and risk corridors, are set to expire in 2017, leaving risk adjustment alone to protect plans against risk of high-cost cases. This paper considers potential modifications of the HHS risk adjustment methodology to maintain plan protection against risk from high-cost cases within the current regulatory framework. We show analytically that modifications of the transfer formula and of the risk adjustment model itself are mathematically equivalent to a conventional actuarially fair reinsurance policy. Furthermore, closely related modifications of the transfer formula or the risk adjustment model can improve on conventional reinsurance by figuring transfers or estimating risk adjustment model weights recognizing the presence of a reinsurance function. In the empirical section, we estimate risk adjustment models with an updated and selected version of the data used to calibrate the federal payment models, and show, using simulation methods, that proposed modifications improve fit at the person level and protect small insurers against high-cost risk better than conventional reinsurance. We simulate various “attachment points” for the reinsurance equivalent policies and quantify the tradeoffs of higher and lower attachment points.
    JEL: I11 I13 I18
    Date: 2016–08
  14. By: Kyle C. Meng
    Abstract: Addressing climate change requires transitioning away from coal-based energy. Recent structural change models demonstrate that temporary interventions could induce permanent fuel switching when transitional dynamics exhibit strong path dependence. Exploiting changes in local coal supply driven by subsurface coal accessibility, I find that transitory shocks have strengthening effects on the fuel composition of two subsequent generations of U.S. electricity capital. To facilitate a structural interpretation, I develop a model which informs: tests that find scale effects as the relevant mechanism; recovery of the elasticity of substitution between coal and non-coal electricity; and simulations of future carbon emissions following temporary interventions.
    JEL: N51 N52 O41 Q35 Q43 Q54 Q58
    Date: 2016–08
  15. By: Lehmus, Markku; Suni, Paavo
    Abstract: Leaving the EU reduces the UK output significantly relative to the baseline in all three trade scenarios (EEA, FTA and WTO) analyzed in the paper. The WTO scenario assumes the loosest links with the EU and biggest barriers to trade and hence, it implies the greatest negative impact on the UK economy, whereas the negative impact is the smallest in the EEA scenario. Brexit affects the Finnish economy via the weakening British economy along with its global impacts. Nevertheless, the effects on the Finnish economy seem to be to some extent more positive than what is observed in analyzed countries. The better development is due to the improved price competitiveness born by adjustments in the effective exchange rates and, also, a favorable combination of relevant trade partners, comprising for instance Russia and China that are relatively immune to the negative effects of Brexit. After the negative short-run hit caused by Brexit, the Finnish export industries are able to win new market shares from the UK industries. This simulation result concerning the long-run development looks very optimistic for Finland. It does not take into account the possible negative effects of Brexit on the EU integration process that may disrupt the single market. For these reasons, there is a substantial probability for more negative effects on the Finnish economy as well.
    Date: 2016–08–23
  16. By: Constantinos Kardaras; Scott Robertson
    Abstract: We consider the problem of estimating the joint distribution of a continuous-time perpetuity and the underlying factors which govern the cash flow rate, in an ergodic Markovian model. Two approaches are used to obtain the distribution. The first identifies a partial differential equation for the conditional cumulative distribution function of the perpetuity given the initial factor value, which under certain conditions ensures the existence of a density for the perpetuity. The second (and more general) approach, using techniques of time reversal, identifies the joint law as the stationary distribution of an ergodic multidimensional diffusion. This latter approach allows efficient use of Monte Carlo simulation, as the distribution is obtained by sampling a single path of the reversed process.
    Keywords: PerpetuitiesTime reversalErgodic diffusionsMonte Carlo simulation
    JEL: C1
    Date: 2016

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