nep-cmp New Economics Papers
on Computational Economics
Issue of 2017‒01‒29
eighteen papers chosen by

  1. MAREA Trading Simulations Experiments with the Focus on Marketing Campaign By Roman Šperka; Michal Halaška
  2. The Effects of Labour Market Reforms upon Unemployment and Income Inequalities: an Agent Based Model By Giovanni Dosi; Manoela Carrera Pereira; Andrea Roventini; Maria Enrica Virgillito
  3. Emergent Uncertainty in Regional Integration -Economic impacts of alternative RTA scenarios- By Kenichi Kawasaki
  4. Saver types: An evolutionary-adaptive approach By Gergely Varga; Janos Vincze
  5. The Vehicle Rescheduling Problem with Retiming By van Lieshout, R.N.; Mulder, J.; Huisman, D.
  6. Calibration of a Four-Factor Hybrid Local-Stochastic Volatility Model with a New Control Variate Particle Method By Andrei Cozma; Matthieu Mariapragassam; Christoph Reisinger
  7. L’impact des réformes commerciales sur l’emploi et le bien-être dans les pays de la CEDEAO : le cas du Sénégal By Sokhna Diarra MBOUP; Racky BALDE; Thierno Malick DIALLO; Christian Arnault EMINI
  8. “Regional tourism demand forecasting with machine learning models: Gaussian process regression vs. neural network models in a multiple-input multiple-output setting” By Oscar Claveria; Enric Monte; Salvador Torra
  9. Transition paths for Bewley-Huggett-Aiyagari models: Comparison of some solution algorithms By Kirkby, Robert
  10. Exact expectations - Efficient calculation of DSGE models By Fabian Goessling
  11. Supply based on demand dynamical model By Asaf Levi; Juan Sabuco; Miguel A. F. Sanjuan
  12. IGEM II: a New Variant of the Italian General Equilibrium Model By Barbara Annichiarico; Fabio Di Dio; Francesco Felici
  13. Population Aging, Unfunded Social Security and Economic Growth By Ken Tabata
  14. The impact of the Basel III liquidity coverage ratio on macroeconomic stability: An agent-based approach By Li, Boyao
  15. A Multi-Criteria Portfolio Analysis of Hedge Fund Strategies By David E. Allen; Michael McAleer; Abhay K. Singh
  16. Measuring News Sentiment By Shapiro, Adam Hale; Sudhof, Moritz; Wilson, Daniel J.
  17. Complexity and the Economics of Climate Change: a Survey and a Look Forward By Tomas Balint; Francesco Lamperti; Mauro Napoletano; Antoine Mandel; Andrea Roventini; Sandro Sapio
  18. Forecasting UK Income Tax By Zara Ghodsi; Allan Webster

  1. By: Roman Šperka (Department of Business Economics and Management, School of Business Administration, Silesian University); Michal Halaška (Department of Business Economics and Management, School of Business Administration, Silesian University)
    Abstract: The aim of this paper is to present the use of innovation of decision function in the implementation of a multi-agent simulation model of a trading company with focus on marketing campaigns. We modeled a real trading company dealing with retailing of cables. The subject of the presented research are simulation experiments in MAREA software framework to evaluate the effectiveness of marketing campaign on a company’s Key Performance Indicators (KPIs) during 365 days. We implemented three different scenarios and compared the trading results. In the first scenario company does not campaign at all, in the second scenario company uses one marketing campaign during simulation time, and in the third scenario company uses marketing campaign regularly throughout whole simulation time. We assumed that marketing communication affects customers’ preferences in our model, but cannot force them to buy goods they are not willing to buy. We incorporated price sensitivity and direct effects of marketing communication on customers, though implemented model is well suited for advertising, but can hardly simulate marketing forms as e.g., sponsorship or public relation. Further we assumed only positive effects of marketing campaigns. Based on the assumptions we determined and evaluated several hypotheses. Firstly, we present a multi-agent system details and a formal description of a decision function which is used to establish the preferences of customers. Secondly, we present MAREA software framework and lastly we discuss the simulation results. The results obtained show that while one marketing campaign may have momentarily effects on company’s KPIs, it does not have effect on the final results of the simulation. On the other hand, the regular campaigning has statistically significant impact on company’s KPIs.
    Keywords: multi-agent system, framework, model, simulation, software, business process, trading, MAREA
    JEL: F1 F31
    Date: 2017–01–17
  2. By: Giovanni Dosi (Laboratory of Economics and Management); Manoela Carrera Pereira (Universidade Estadual de Campinas); Andrea Roventini (Laboratory of Economics and Management (Pisa) (LEM)); Maria Enrica Virgillito (Scuola Superiore Sant'Anna)
    Abstract: This paper is meant to analyse the e ects of labour market structural reforms by means of an agent-based model. Building on Dosi et al. (2016b) we introduce a policy regime change characterized by a set of structural reforms on the labour market, keeping constant the structure of the capital- and consumption-good markets. Con rming a recent IMF report (Jaumotte and Buitron, 2015), the model shows how labour market structural reforms re- ducing workers' bargaining power and compressing wages tend to increase (i) unemployment, (ii) functional income inequality, and (iii) personal income inequality. We further undertake a global sensitivity analysis on key variables and parameters which con rms the robustness of our findings.
    Keywords: Labor market structural reforms; Income distribution; Inequality; Unemployment; Long run growth
    JEL: C63 E2 E12 E24 O11
    Date: 2016–07
  3. By: Kenichi Kawasaki (National Graduate Institute for Policy Studies)
    Abstract: Recently a number of large-scale uncertainties have emerged as threats to the development of regional integration. Most notably, the UK has decided to leave the EU, and the new US president has stated that he would withdraw the US from the Trans-Pacific Partnership (TPP). This paper presents a quantitative comparison of the economic impacts of a number of alternative regional trade agreement (RTA) scenarios. The impacts were estimated using a Computable General Equilibrium (CGE) model of global trade. It is estimated that the US would no longer gain and might even lose, if it withdraws from TPP. The benefits of the bilateral Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA) with Japan would be smaller than those of TPP. Higher tariffs on US imports from China and Mexico would lead to significant deterioration of the economic welfare of not only China and Mexico but also the US. Furthermore, China fs benefits from the Regional Comprehensive Economic Partnership (RCEP) might be relatively limited depending on the levels of the agreement and weighed against the adverse impacts of the possible US tariffs. The UK economy would suffer as a result of BREXIT, but the cost of BREXIT could be smaller than the possible benefits of joining TPP. All in all, it has been shown that income gains resulting from non-tariff measure (NTM) reductions are much larger than those arising from tariff removals. Global best efforts are required to achieve higher level RTAs and the resulting larger economic benefits.
    Date: 2017–01
  4. By: Gergely Varga (Corvinus University of Budapest); Janos Vincze (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Corvinus University of Budapest)
    Abstract: We set up an agent-based macromodel focusing on consumption-saving without the assumption of utility maximization, but preserving certain "rational" aspects of human choice based on the idea of ecological rationality Todd et al. (2012). In this framework we address the classical problem of the efficiency of long-run capital accumulation. Three qualitatively different saving strategies are defined: 1. buffer stock saving (prudent and forward looking), 2. permanent income saving (forward looking without prudence), and 3. myopic saving (caring only about immediate consumption, and saving accidentally). In the model these types (that have subtypes depending on continuous parameters) may coexist, and we explore their respective survival chances by conducting simulations. It is found that prudent saving behavior becomes prevalent when the selection pressure is very high, but an economy comprising only prudent households tends to accumulate capital in excess of what is implied by the Golden Rule. As selecion pressure is reduced, myopic consumers appear, and under very low selection pressure the distribution of the main saver types becomes almost random. A seemingly puzzling fact emerges: the economy gets close to the Golden Rule of capital accumulation via endogenous selection of subtypes in a way that can be interpreted as "perverse exploitation", i.e. the exploitation of the rich by the poor. In other words, lowering the intensity of evolutionary forces, that results in more diversity in saver types, may be socially beneficial. Crickets may be useful for society as a whole, including prudent and cautious ants.
    Keywords: agent-based macromodel, bounded rationality, evolutionary learning, savings types
    JEL: C69 E21
    Date: 2017–01
  5. By: van Lieshout, R.N.; Mulder, J.; Huisman, D.
    Abstract: When a vehicle breaks down during operation in a public transportation system, the remaining vehicles can be rescheduled to minimize the impact of the breakdown. In this paper, we discuss the vehicle rescheduling problem with retiming (VRSPRT). The idea of retiming is that scheduling flexibility is increased, such that previously inevitable cancellations can be avoided. To incorporate delays, we expand the underlying recovery network with retiming possibilities. This leads to a problem formulation that can be solved using Lagrangian relaxation. As the network gets too large, we propose an iterative neighborhood exploration heuristic to solve the VRSPRT. This heuristic allows retiming for a subset of trips, and adds promising trips to this subset as the algorithm continues. Computational results indicate that the heuristic performs well. While requiring acceptable additional computation time, the iterative heuristic finds improvement over solutions that do not allow retiming in one third of the tested instances. By delaying only one or two trips with on average 4 minutes, the average number of cancelled trips is reduced with over 30 percent.
    Keywords: Vehicle rescheduling, retiming, Lagrangian heuristic
    Date: 2016–11–01
  6. By: Andrei Cozma; Matthieu Mariapragassam; Christoph Reisinger
    Abstract: We propose a novel and generic calibration technique for four-factor foreign-exchange hybrid local-stochastic volatility models with stochastic short rates. We build upon the particle method introduced by Guyon and Labord\`ere [Nonlinear Option Pricing, Chapter 11, Chapman and Hall, 2013] and combine it with new variance reduction techniques in order to accelerate convergence. We use control variates derived from a calibrated pure local volatility model, a two-factor Heston-type LSV model (both with deterministic rates), and the stochastic (CIR) short rates. Our numerical experiments show that because of the dramatic variance reduction we are able to calibrate the four-factor model at almost no extra computational cost when the corresponding calibrated two-factor model is at our disposal. The method can be applied to a large class of hybrid LSV models and is not restricted to our particular choice of the diffusion. The calibration procedure is performed on real-world market data for the EUR-USD currency pair.
    Date: 2017–01
  7. By: Sokhna Diarra MBOUP; Racky BALDE; Thierno Malick DIALLO; Christian Arnault EMINI
    Abstract: This study evaluates the impact of the ECOWAS-CET and the Economic Partnership Agreement (EPA) on youth employment and on welfare in Senegal. The analysis is conducted using the PEP-1-1 model, which is a static computable general equilibrium model. The simulation results indicate that applying ECOWAS-CET instead of WAEMU-CET generates an increase in youth and female employment, whatever their qualification level, as well as a general increase in welfare for households in Senegal. However, the implementation of EPA downgrades this situation and leads to a reverse effect on employment of all workers, mainly youth and female employment, as well as on welfare.
    Keywords: ECOWAS, Senegal, Trade, Free trade, Regional Integration, Economic Partnership Agreement (EPA), Employment, Welfare, Computable general equilibrium (CGE) model
    JEL: F13 F43 C68 E24 E27
    Date: 2016
  8. By: Oscar Claveria (AQR-IREA, University of Barcelona); Enric Monte (Polytechnic University of Catalunya (UPC)); Salvador Torra (Riskcenter-IREA, University of Barcelona)
    Abstract: This study presents a multiple-input multiple-output (MIMO) approach for multi-step-ahead time series prediction with a Gaussian process regression (GPR) model. We assess the forecasting performance of the GPR model with respect to several neural network architectures. The MIMO setting allows modelling the cross-correlations between all regions simultaneously. We find that the radial basis function (RBF) network outperforms the GPR model, especially for long-term forecast horizons. As the memory of the models increases, the forecasting performance of the GPR improves, suggesting the convenience of designing a model selection criteria in order to estimate the optimal number of lags used for concatenation.
    Keywords: Regional forecasting, tourism demand, multiple-input multiple-output (MIMO), Gaussian process regression, neural networks, machine learning JEL classification: -
    Date: 2017–01
  9. By: Kirkby, Robert
    Abstract: We analyse general equilibrium transition paths for Bewley-Huggett-Aiyagari models: general equilibrium models with heterogeneous agents, incomplete markets, and idiosyncratic but no aggregate uncertainty. We first provide precise definitions of the theoretical problem to be solved. We then consider a variety of algorithms for computation of the finite horizon general equilibrium transition paths. These algorithms can solve for unannounced one-off changes, pre-announced one-off changes, or even any finite series of one-off changes (such as announcing today a series of tax increases to be rolled out over the next few years). The algorithms are all based on shooting-algorithms but differ in how they update the price paths during convergence. Evaluation of the algorithms in terms of both robustness and runtime is performed by applying them to looking at capital tax reforms in the model of Aiyagari (1994) and its extension to endogenous labour. Simulation results show that the literature standard of simply using a fixed factor to update the entire path performs both fast and robustly; and that a weight of 0.9 on the old path is typically the best by these criterion.
    Keywords: Bewley-Huggett-Aiyagari models, Numerical methods, Transition Path, General Equilibrium,
    Date: 2017
  10. By: Fabian Goessling
    Abstract: Global solution methods for dynamic stochastic general equilibrium (DSGE) models are acurrate but computationally expensive. In particular computing conditional expectations for numerous points in the state-space leads to signi cant complexity. In the present paper, I show how to remove the majority of calculations required for the evaluation of conditional expectations. Therefore I replace the approximated conditional expectation obtained by e.g. quadrature rules with an exact expectation. Further, similar to Judd et al. (2011), the required integrals are evaluated at the initial stage of the algorithm. I adopt Chebyshev polynomials as basis functions and provide a general framework. Subsequently, I adapt the technique to the neoclassical model with recursive utility and labor choice.
    Keywords: Profection, Precomputation, DSGE, Complexity reduction
    JEL: C63 C68
    Date: 2016–09
  11. By: Asaf Levi; Juan Sabuco; Miguel A. F. Sanjuan
    Abstract: We propose and analyze numerically a simple dynamical model that describes the firm behaviors under uncertainty of demand forecast. Iterating this simple model and varying some parameters values we observe a wide variety of market dynamics such as equilibria, periodic and chaotic behaviors. Interestingly the model is also able to reproduce market collapses.
    Date: 2017–01
  12. By: Barbara Annichiarico; Fabio Di Dio; Francesco Felici
    Abstract: This paper provides a full technical description of a variant of the Italian General Equilibrium Model (IGEM), a dynamic general equilibrium model used as a laboratory for policy analysis at the Department of the Italian Treasury. This version of IGEM presents four specific key features: (i) imperfectly competitive final good sector; (ii) involuntary unemployment; (iii) a business tax bearing on firms; (iv) market frictions in the labor market of atypical workers. The paper presents some simulation scenarios of structural and fiscal reforms.
    Keywords: Dynamic General Equilibrium Model, Quantitative Policy Analysis, Simulation Analysis, Italy
    JEL: E27 E30 E60
    Date: 2016–10
  13. By: Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper examines how population aging caused by a decline in the birth rate or a reduction in the mortality rate affects economic growth in an overlapping generations model with a general demographic structure and a sizable unfunded social security system. Through numerical simulations, we show that a decline in the birth rate has non-monotonic effects on economic growth, yielding a hump-shaped relationship between the population growth rate and the economic growth rate, whereas a reduction in the mortality rate has a monotonic positive effect on economic growth, yielding a monotonic positive relationship between the population growth rate and the economic growth rate. We also use our model to study how predicted and occurring demographic changes in Japan affect that country’s economic growth rate. We show that the growth effect of the predicted demographic changes in Japan is initially positive but it may turn out to be negative from the mid 2030s forward. This paper also examines the growth and welfare effects of a reduction in pension payments or an extension of the retirement age, and shows that the pension payment reduction policy is better than the retirement extension policy for both growth and welfare in response to population aging.
    Keywords: Population aging, Unfunded social security, Retirement age, Economic growth
    JEL: D91 H55 O41
    Date: 2017–01
  14. By: Li, Boyao
    Abstract: Commercial banks across the world have been implementing the Basel III accord, which is the most important international response to the 2007-2008 financial crisis. Particularly, the liquidity coverage ratio (LCR) introduced by the Basel III accord is the first global standard for banking liquidity management. Does this requirement work? And what macroeconomic effects does it produce? In order to address such crucial issues, the author develops a stock-flow consistent (SFC)/agent-based computational economic (ACE) model. As he knows, there is a real danger that the requirement restricts the availability of bank credit and hence reducing economic activity. However, in comparison to the prior works, the author finds that the externality is presented as a positive self-reinforcing feedback process, which causes the macroeconomic conditions to spiral downwards. This dynamic feedback process that hardly can be revealed by the current macroeconomic models based on equilibrium analyses. The results also shed some light on the fact that credit creation substantially affects economic activity and macroeconomic stability, as the fundamental reason leading to the results. Therefore, the bank as the driver of credit creation is crucial in an economy, and meanwhile bank regulations have great potential impacts on entire economy rather than only in the bank sector itself.
    Keywords: credit creation,liquidity coverage ratio,bank regulation,economic stability,agentbased macroeconomics,stock-flow consistency,business cycle,crisis
    JEL: E27 E44 E51 E32 G01 G28
    Date: 2017
  15. By: David E. Allen (Centre for Applied Financial Studies, University of South Australia, School of Mathematics and Statistics, University of Sydney, and School of Business and Law, Edith Cowan University.); Michael McAleer; Abhay K. Singh
    Abstract: This paper features a tri-criteria analysis of Eurekahedge fund data strategy index data. We use nine Eurekahedge equally weighted main strategy indices for the portfolio analysis. The tri-criteria analysis features three objectives: return, risk and dispersion of risk objectives in a Multi-Criteria Optimisation (MCO) portfolio analysis. We vary the MCO return and risk targets and contrast the results with four more standard portfolio optimisation criteria, namely the tangency portfolio (MSR), the most diversi_ed portfolio (MDP), the global minimum variance portfolio (GMW), and portfolios based on minimising expected shortfall (ERC). Backtests of the chosen portfolios for this hedge fund data set indicate that the use of MCO is accompanied by uncertainty about the a priori choice of optimal parameter settings for the decision criteria. The empirical results do not appear to outperform more standard bi-criteria portfolio analyses in the backtests undertaken on our hedge fund index data.
    Keywords: MCO, Portfolio Analysis, Hedge Fund Strategies, Multi-Criteria Optimisation, Genetic Algorithms.
    JEL: G15 G17 G32 C58 D53
    Date: 2016–12
  16. By: Shapiro, Adam Hale (Federal Reserve Bank of San Francisco); Sudhof, Moritz (Kanjoya); Wilson, Daniel J. (Federal Reserve Bank of San Francisco)
    Abstract: We develop and assess new time series measures of economic sentiment based on computational text analysis of economic and financial newspaper articles from January 1980 to April 2015. The text analysis is based on predictive models estimated using machine learning techniques from Kanjoya. We analyze four alternative news sentiment indexes. We find that the news sentiment indexes correlate strongly with contemporaneous business cycle indicators. We also find that innovations to news sentiment predict future economic activity. Furthermore, in most cases, the news sentiment measures outperform the University of Michigan and Conference board measures in predicting the federal funds rate, consumption, employment, inflation, industrial production, and the S&P500. For some of these economic outcomes, there is evidence that the news sentiment measures have significant predictive power even after conditioning on these survey-based measures.
    JEL: E32 E37
    Date: 2017–01–05
  17. By: Tomas Balint (Université Panthéon-Sorbonne - Paris 1 (UP1)); Francesco Lamperti (Université Panthéon-Sorbonne - Paris 1 (UP1)); Mauro Napoletano (Observatoire français des conjonctures économiques); Antoine Mandel (Ecole d'Économie de Paris - Paris School of Economics); Andrea Roventini (Laboratory of Economics and Management (Pisa) (LEM)); Sandro Sapio (Università degli Studi di Napoli Parthenope)
    Abstract: We provide a survey of the micro and macro economics of climate change from a complexity science perspective and we discuss the challenges ahead for this line of research. We identify four areas of the literature where complex system models have already produced valuable insights: (i) coalition formation and climate negotiations, (ii) macroeconomic impacts of climate-related events, (iii) energy markets and (iv) diffusion of climate-friendly technologies. On each of these issues, accounting for heterogeneity, interactions and disequilibrium dynamics provides a complementary and novel perspective to the one of standard equilibrium models. Furthermore, it highlights the potential economic benefits of mitigation and adaptation policies and the risk of under-estimating systemic climate change-related risks.
    Keywords: Climate change; Climate policy; Climate economics; Complex systems; Agent-based models; Socio-economics networks
    JEL: C63 Q40 Q50 Q54
    Date: 2016–07
  18. By: Zara Ghodsi (Statistical Research Centre, Bournemouth University); Allan Webster (Statistical Research Centre, Bournemouth University)
    Abstract: The literature on forecasting tax revenues focuses on the need for a body of competing forecasts independent of government, to limit potential political bias. The Office for Budget Responsibility does provide detailed independent forecasts for the UK but there are limited alternatives. The literature on appropriate techniques for forecasting detailed tax revenues is under-developed. In many countries tax revenue forecasts are embedded in a more extensive macro-economic forecasting model. These models lack sufficient precision for revenue forecasting revenues for several specific taxes. Such models are too involved to support a body of competing independent forecasts. In consequence there is an established need for single equation revenue forecasts for specific taxes to complement the macro-economic approach. This study considers the use of a number of (mainly) time series forecasting techniques. We find Recurrent Singular Spectrum Analysis (RSSA) to perform the best of the techniques considered.
    Keywords: United Kingdom; Income Tax; Forecasting; Singular Spectrum Analysis; ARIMA; Exponential Smoothing; Neural Networks
    Date: 2017–01

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