nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒10‒23
seven papers chosen by
Stan Miles
Thompson Rivers University

  1. Matriz insumo-producto interregional para Colombia, 2012 By Eduardo Haddad; Weslem Faria; Luis Armando Galvis-Aponte; Lucas Wilfried Hahn-De-Castro
  2. Optimal Claiming Strategies in Bonus Malus Systems and Implied Markov Chains By Arthur Charpentier; Arthur David; Romuald Elie
  3. Informality in the Process of Development and Growth By Norman V. Loayza
  5. VAT Evasion in Bulgaria: A General-Equilibrium Approach By Aleksandar Vasilev
  6. Estimation and prediction of an Index of Financial Safety of Tunisia By Matkovskyy, Roman; Bouraoui, Taoufik; Hammami, Helmi
  7. Central Bank Sentiment and Policy Expectations By Paul Hubert; Fabien Labondance

  1. By: Eduardo Haddad; Weslem Faria; Luis Armando Galvis-Aponte; Lucas Wilfried Hahn-De-Castro
    Abstract: Este documento presenta un breve resumen de los principales aspectos asociados a la construcción de una matriz de insumo-producto interregional para Colombia. Como parte de un proyecto en curso que tiene como objetivo actualizar un modelo interregional de equilibrio general computable (ICGE), el modelo CEER, se construyó una base de datos bajo condiciones de información limitada. Para ello se estimó un modelo de insumo-producto interregional completamente especificado, que sirvió para la posterior calibración del modelo ICGE. Con este modelo se lleva a cabo un análisis de las participaciones intra e interregionales de los multiplicadores medios de producto. Por otra parte, también se muestran algunas cifras detalladas sobre la descomposición del producto, teniendo en cuenta la estructura de la demanda final. ******ABSTRACT: This paper reports on the recent developments in the construction of an interregional input-output matrix for Colombia (IIOM-COL). As part of an ongoing project that aims to update an interregional CGE (ICGE) model for the country, the CEER model, a fully specified interregional input-output database was developed under conditions of limited information. Such database is needed for future calibration of the ICGE model. We conduct an analysis of the intraregional and interregional shares for the average total output multipliers. Furthermore, we also show detailed figures for the output decomposition, taking into account the structure of final demand.
    Keywords: Modelo CEER, Matriz insumo-producto interregional, nueva geografía económica, Colombia.
    JEL: R15
    Date: 2016–10–14
  2. By: Arthur Charpentier (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique); Arthur David (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique); Romuald Elie (LAMA - Laboratoire d'Analyse et de Mathématiques Appliquées - Fédération de Recherche Bézout - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, we investigate the impact of the claim reporting strategy of drivers, within a bonus malus system. We exhibit the induced modification of the corresponding class level transition matrix and derive the optimal reporting strategy for rational drivers. The hunger for bonuses induces optimal thresholds under which, drivers do not claim their losses. A numerical algorithm is provided for computing such thresholds and realistic numerical applications are discussed.
    Keywords: bonus malus, markov chains
    Date: 2016–06–05
  3. By: Norman V. Loayza (World Bank)
    Abstract: “Informality” is a term used to describe the collection of firms, workers, and activities that operate outside the legal and regulatory systems. It is widespread in the majority of developing countries—in a typical developing economy, the informal sector produces about 35 percent of gross domestic product and employs 70 percent of the labor force. This paper studies informality in the context of economic development by presenting a model and projections that link informality, regulations, migration, and economic growth. This analytical framework highlights the trade-offs between formality and informality, the relationship between the different types of informality, and the connection between them and the forces of labor, capital, and productivity growth. The paper models the behavior of the informal sector based on the following fundamental asymmetry: formal firms confront higher labor costs while informal firms face higher capital costs and lower productivity. Using mandated minimum wages as the policy-induced distortion, the model first studies the static allocation of formal and informal capital and labor in a modern economy. Second, it opens the possibility of labor migration from a rudimentary economy with an ample supply of labor (rural areas or less advanced neighboring countries). Third, the model analyzes the dynamic behavior of the formal and informal sectors, considering how they affect and are affected by economic growth and labor migration. Then, the paper presents projections for the size of labor informality, in the modern and rudimentary economies, in the next two decades for a large group of countries representing all regions of the world. The projections are based on the calibration and simulation of the model and serve to discuss its usefulness and limitations.
    Keywords: Shrinkage, Informality, Minimum Wage, Labor Costs, Economic Growth, Migration, Labor Market, Financial Constraints, Productivity
    JEL: E26 E24 J46 O17 O11 O15 O40 O47
    Date: 2016–10
  4. By: Gianluca Femminis (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: These notes provide an intuitive introduction to dynamic programming. The first two Sections, which can be skipped, present the standard deterministic Ramsey model using the Lagrangian approach. Section 3 reformulates the Ramsey problem by means of a Bellman equation, while Section 4 shows how to “guess” the maximum value function solving the problem (when this is possible). Section 5 is devoted to applications of the envelope theorem. Section 6 provides a “paper and pencil” introduction to the numerical techniques used in dynamic programming, and can be skipped by the uninterested reader. Sections 7 to 9 are devoted to stochastic modelling, and to the use of stochastic Bellman equations. Section 10 extends the discussion of numerical techniques. Two Appendixes provide details about the Matlab routines used to deal with the examples, and the solutions of the exercises proposed in the main text.
    Keywords: Dynamic programming, Bellman equation, Optimal growth, Numerical techniques.
    JEL: C61 O41 C63
    Date: 2016–10
  5. By: Aleksandar Vasilev (Department of Economics, American University in Bulgaria)
    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-di erentiated 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 gures 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: 2016–10
  6. By: Matkovskyy, Roman; Bouraoui, Taoufik; Hammami, Helmi
    Abstract: This paper analyses the strength of the financial system of Tunisia through the construction of an Index of Financial Safety (IFS). Over the period 2000Q1 – 2014Q3, the IFS is built using a wide range of financial and macroeconomic indicators. The empirical results show that it can capture the disturbances in Tunisian financial system with sufficient accuracy. The nonlinear autoregressive with exogenous input (NARX) model with Levenberg-Marquardt algorithm of training was selected to forecast changes in IFS, and provides significant results.
    Keywords: index of financial safety of a country; IFS; nonlinear autoregressive with exogenous input (NARX) model; neural networks
    JEL: C1 C45 C51 C53 G10 G17
    Date: 2015
  7. By: Paul Hubert (Observatoire français des conjonctures économiques); Fabien Labondance (Observatoire français des conjonctures économiques)
    Abstract: We explore empirically the theoretical prediction that waves of optimism or pessimism may have aggregate effects, in the context of monetary policy. We investigate whether the sentiment conveyed by ECB and FOMC policymakers in their statements affect the term structure of private short-term interest rate expectations. First, we quantify central bank tone using a computational linguistics approach. Second, we identify sentiment as exogenous shocks to these quantitative measures using an augmented narrative approach following the information friction literature. Third, we estimate the impact of sentiment on private agents’ expectations about future short-term interest rates using a high-frequency methodology and an ARCH model. We find that sentiment shocks increase private interest rate expectations around maturities of one and two years. We also find that this effect is non-linear and depends on the state of the economy and on the characteristics (precision, sign and size) of the sentiment signal.
    Keywords: Animal spirits; Optimism; Confidence; Central Bank communication; Interest rate expectations; ECB; FOMC
    JEL: E43 E52 E58
    Date: 2016–09

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