nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒11‒20
thirteen papers chosen by
Stan Miles
Thompson Rivers University

  1. A CGE model for India with an application on the effects of eliminating agricultural subsidies By Peter B. Dixon; Maureen T. Rimmer; Rajesh Chadha; Devender Pratap; Anjali Tandon
  2. Are input policies effective to enhance food security in Kenya? A CGE Analysis By Boulanger, Pierre; Dudu, Hasan; Ferrari, Emanuele; Mainar, Alfredo; Proietti, Ilaria
  3. Agent Based Models, Housing Fluctuations and the Role of Heterogeneous Expectations By Jinke Li; Geoffrey Meen
  4. SAMOD, a South African tax-benefit microsimulation model Recent developments By Gemma Wright; Michael Noble; Helen Barnes; David McLennan; Michell Mpike
  5. CoPS-style CGE modelling and analysis By Esmedekh Lkhanaajav
  6. Neural networks would 'vote' according to Borda's Rule By Burka, Dávid; Puppe, Clemens; Szepesváry, László; Tasnádi, Attila
  7. How the interbank market becomes systemically dangerous: an agent-based network model of financial distress propagation By Matteo Serri; Guido Caldarelli; Giulio Cimini
  8. An analysis of euro area bond maturities and simulation of the introduction of new CACs By Eidam, Frederik
  9. Elderly Care, Child Care, and Labor Supply in an Aging Japan By Ryuta Ray Kato
  10. The Asset Liability Management problem of a nuclear operator : a numerical stochastic optimization approach By Xavier Warin
  11. No More Excuses! A Toolbox for Solving Heterogeneous Agent Models with Aggregate Shocks By Thomas Winberry; Greg Kaplan; Benjamin Moll; SeHyoun Ahn
  12. Climate change impacts: Understanding the synergetic interactions using graph computing By Halkos, George; Tsilika, Kyriaki
  13. Computation of first-order Greeks for barrier options using chain rules for Wiener path integrals By Kensuke Ishitani

  1. By: Peter B. Dixon; Maureen T. Rimmer; Rajesh Chadha; Devender Pratap; Anjali Tandon
    Abstract: Because of its flexibility and realism, CGE has gradually become the dominant form of economy-wide modelling (modelling that provides industry disaggregation in a quantitative description of the whole economy). Over the last 50 years, CGE models have been used in the analysis of an enormous variety of policy-relevant questions. This paper describes the construction and initial application of the first version of the NCAER-VU CGE model of India. We describe in detail our process of transforming input-output data published by India Statistics into a form suitable for CGE modelling. We have also expended considerable effort in processing data on agricultural land use with the aim of facilitating applications concerned with agricultural policy. As an illustrative simulation, we investigate the effects of removing or modifying agricultural subsidies (which account for about 2.5 per cent of Indian GDP). We find that these subsidies inflict a GDP dead-weight loss of about 0.20%, but do not contribute to the objective of supporting farm income. However, if subsidies to Fertilizer and Electricity used by agriculture were phased out and replaced with additional production and sales subsidies, then real farm income would be increased by about 4% with no deterioration in the public sector budget, almost no effect on food security, and small increases in GDP and overall welfare.
    Keywords: fertilizer subsidies, electricity subsidies, India, CGE model
    JEL: C68 Q18 H25
    Date: 2016–11
  2. By: Boulanger, Pierre; Dudu, Hasan; Ferrari, Emanuele; Mainar, Alfredo; Proietti, Ilaria
    Abstract: Food security remains a key challenge in many Sub-Saharan African countries and in Kenya in particular. Despite the astonishing improvement achieved in the last decades, still a relevant share of the population lives below the minimum level of dietary energy consumption. Kenya addresses this concern with a noteworthy policy mix, aiming at giving to the agricultural sector a leading task in improving food security. In this paper, through a Computable General Equilibrium (CGE) model specifically modified for the context of developing country analyses, we address the impacts of three input policy options with reference to increases in fertiliser use, seed quality and irrigation investment. For the purpose of the study, a desegregated version of a 2014 Social Accounting Matrix (SAM) has been developed for Kenya. First results of simulated policy changes present overall positive effects on key food security aggregates related to food availability and access. Nevertheless a more careful analysis at regional and household type levels is required in order to draw wide-ranging policy recommendations.
    Keywords: Food Security and Poverty, Research and Development/Tech Change/Emerging Technologies,
    Date: 2016–09
  3. By: Jinke Li (School of Management, University of Swansea); Geoffrey Meen (Department of Economics, University of Reading)
    Abstract: Agent-based models (ABMs) have a long history, but are gradually being introduced as a technique into mainstream economics. ABMs are perhaps best known as a tool for explaining the spatial structure of cities, including patterns of segregation, using cellular automata. In this context ABMs can be used to demonstrate self-organisation and phases of transition, arising from interdependencies in behaviour. A key feature of ABMs is that they relax the traditional assumption of representative agents, used in macroeconomic models, so that agents are heterogeneous in behaviour. This has profound implications for the structure of models of financial and housing markets. In the standard pricing model, where house prices are modelled as the discounted stream of future rental payments, outcomes depend on the choice of the discount rate, which in the case of housing is the user cost of capital. But the user cost of capital requires a measure of house price expectations. Where agents have heterogeneous expectations, the model cannot be solved for the standard rational expectations outcomes and different approaches are required. It cannot be assumed that all agents’ expectations are determined by the true model determining prices. The question asked in this paper is what effect on aggregate housing market fluctuations occurs from heterogeneous expectations across agents compared with more conventional representative agent models. The starting point is the Artificial Stock Market Model first developed in the 1990s by Arthur et al., arising from the research programme in complex systems at the Santa Fe Institute, which we adapt to a housing market context and simulate on UK data.
    Keywords: agent based models, heterogeneity, expectations, volatility
    JEL: E32 E37 R21
    Date: 2016–07–05
  4. By: Gemma Wright; Michael Noble; Helen Barnes; David McLennan; Michell Mpike
    Abstract: This paper provides an account of a South African tax-benefit microsimulation model—SAMOD—which has been developed for use by government over the past ten years. The two datasets that underpin the current version of SAMOD are introduced, and the model’s tax and benefit policies are described with discussion of the various data challenges and assumptions that had to be made in order to simulate them, with particular emphasis on the value-added tax policy. Simulations using the two different underpinning datasets are compared with reported administrative data. The paper concludes by highlighting three future developments for SAMOD.
    Keywords: tax-benefit; microsimulation, South Africa
    Date: 2016
  5. By: Esmedekh Lkhanaajav
    Abstract: CoPS is a world leader in CGE modelling. This paper describes a brief history of CoPS style of CGE modelling; from ORANI to new generation CoPS models, and discusses the distinctive features of CoPS style models. In addition, it introduces solution methods, notations, and tools that are used in CoPS style of CGE modelling and analysis.
    Keywords: CGE modelling CoPS style CGE modelling
    JEL: C68 D58 B23
    Date: 2016–11
  6. By: Burka, Dávid; Puppe, Clemens; Szepesváry, László; Tasnádi, Attila
    Abstract: Can neural networks learn to select an alternative based on a systematic aggregation of convicting individual preferences (i.e. a 'voting rule')? And if so, which voting rule best describes their behavior? We show that a prominent neural network can be trained to respect two fundamental principles of voting theory, the unanimity principle and the Pareto property. Building on this positive result, we train the neural network on profiles of ballots possessing a Condorcet winner, a unique Borda winner, and a unique plurality winner, respectively. We investigate which social outcome the trained neural network chooses, and find that among a number of popular voting rules its behavior mimics most closely the Borda rule. Indeed, the neural network chooses the Borda winner most often, no matter on which voting rule it was trained. Neural networks thus seem to give a surprisingly clear-cut answer to one of the most fundamental and controversial problems in voting theory: the determination of the most salient election method.
    Keywords: voting, social choice, neural networks, machine learning, Borda count
    JEL: D71
    Date: 2016–10–31
  7. By: Matteo Serri; Guido Caldarelli; Giulio Cimini
    Abstract: Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the interbank lending market as an important diffusion channel for financial distress during the recent crisis. In this work we study the stability of the interbank market to exogenous shocks using an agent-based network framework. Our model encompasses several ingredients that have been recognized in the literature as pro-cyclical triggers of financial distress in the banking system: credit and liquidity shocks through bilateral exposures, liquidity hoarding due to counterparty creditworthiness deterioration, target leveraging policies and fire-sales spillovers. But we exclude the possibility of central authorities intervention. We implement this framework on a dataset of 183 European banks that were publicly traded between 2004 and 2013. We document the extreme fragility of the interbank lending market up to 2008, when a systemic crisis leads to total depletion of market equity with an increasing speed of market collapse. After the crisis instead the system is more resilient to systemic events in terms of residual market equity. However, the speed at which the crisis breaks out reaches a new maximum in 2011, and never goes back to values observed before 2007. Our analysis points to the key role of the crisis outbreak speed, which sets the maximum delay for central authorities intervention to be effective.
    Date: 2016–11
  8. By: Eidam, Frederik
    Abstract: This paper studies the maturity structure of sovereign debt in the euro area and the penetration of the sovereign debt stock with a new type of collective action clauses (CACs), labeled Creditor Participation Clauses (CPCs). The first section describes the data. The simulation assumptions for the penetration of the sovereign debt stock with newly issued CPC bonds are described in section two. Section three presents the simulation results.
    Date: 2016
  9. By: Ryuta Ray Kato (International University of Japan)
    Abstract: This paper numerically examines the impact of the financial and time cost of child care as well as elderly care on economic growth and welfare in an aging Japan within a dynamic general equilibrium framework of multi-period overlapping generations with endogenized labor supply. Simulation results indicate that the replacement rate of the public pension scheme becomes below 50 percent from year 2039, even if the currently accumulated public pension funds are used up for paying pension benefits by year 2115. Financial burdens for the first group (age 65 and over) and for the second group (age 40 - 64) in the public long-term care insurance in year 2060 become more than double and more than five times as much as the level of year 2010 in an aging Japan, respectively. While increased child benefits stimulate savings and thus they improve welfare, the impact of elimination of the time cost of child care and elderly care is quite mixed, depending on the gender and job contract types of workers within the household. When the time cost of elderly care spent by all workers irrespective of gender and job contract types is eliminated, many generations enjoy welfare gain, but when the time cost of child care by all workers is eliminated, then almost all generations, except for relatively elder generations, reversely suffer from welfare loss. When a starting age to contribute to the long-term care insurance becomes earlier from the current age of 40 to age 35, welfare of all generations improves.
    Keywords: Child Care, Child Benefits, Elderly Care, Long-Term Care Insurance, Public Pension, Female Labor Supply, Aging, Economic Growth, Simulation, CGE Model
    JEL: C68 H51 E62 H55 J16
    Date: 2016–11
  10. By: Xavier Warin
    Abstract: We numerically study an Asset Liability Management problem linked to the decommissioning of French nuclear power plants. We link the risk aversion of practitioners to an optimization problem. Using different price models we show that the optimal solution is linked to a de-risking management strategy similar to a concave strategy and we propose an effective heuristic to simulate the underlying optimal strategy. Besides we show that the strategy is stable with respect to the main parameters involved in the liability problem.
    Date: 2016–11
  11. By: Thomas Winberry (University of Chicago); Greg Kaplan (Princeton University); Benjamin Moll (Princeton University); SeHyoun Ahn (Princeton University)
    Abstract: How does the joint distribution of income and wealth interact with macroeconomic aggregates? We develop a new continuous-time method that improves the theoretical characterization and computation of incomplete-market models designed to study this question, taking advantage of the fact that such models can be conveniently solved as systems of partial differential equations. We provide a complete analytic characterization of individual consumption and saving behavior as well as a closed-form solution for the wealth distribution in a special case with two income states. We show that aggregate consumption and saving are approximately independent of the distribution of wealth only in the special case of homothetic (CRRA) preferences and hence approximately constant marginal propensities to consume for rich and poor households. With non-homothetic preferences, an increase in income inequality can instead lead to a sizable increase in aggregate savings. Conversely, changes in macroeconomic aggregates may affect the distribution of wealth in unexpected ways. For instance, an increase in aggregate productivity may lead to higher wealth inequality at the bottom of the distribution. Our efficient and flexible computational algorithm easily handles non-differentiable and non-convex problems as well as transition dynamics.
    Date: 2016
  12. By: Halkos, George; Tsilika, Kyriaki
    Abstract: In this study we provide a computerized graph structure for synthesizing and displaying the data on a region’s ecosystem-economic system. By applying Mathematica-based graph modelling we create a causal network of the synergistic impact mechanism among certain climate related factors. Our computational approach identifies a climate factor that affects most immediately or most strongly the others. Important factors are indicated through the use of graph theoretical tools. Our graph-based approach and its computational aspects allow for factor ranking(s) according to their importance to the network both numerically and visually, for certain settlement types. Our contribution provides quantitative estimates of impacts and adaptation potentials of five potential effects of climate change (migration, flooding- landslides- fire, air and water pollution, human health and energy-water-other resources) which play a substantial role at the synergistic impact mechanism. Results allow having a picture of the structure of synergistic impact mechanism in a glimpse. Specifically, visual output is created to detect i) the causal relationships of the synergetic mechanism under study ii) the most influential factor(s) in the synergistic mechanism and iii) classify the factor’s roles (based on the degree of their impact) within the coping mechanism.
    Keywords: Graph theory; vertex centrality; Mathematica; climate related factors; environmental economics computation.
    JEL: C63 C88 P28 Q51 Q54 Q58
    Date: 2016–11
  13. By: Kensuke Ishitani
    Abstract: This paper presents a new methodology to compute first-order Greeks for barrier options under the framework of path-dependent payoff functions with European, Lookback, or Asian type and with time-dependent trigger levels. In particular, we develop chain rules for Wiener path integrals between two curves that arise in the computation of first-order Greeks for barrier options. We also illustrate the effectiveness of our method through numerical examples.
    Date: 2016–11

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