nep-cmp New Economics Papers
on Computational Economics
Issue of 2017‒03‒12
eleven papers chosen by

  1. Stopped TTIP? Its potential impact on the world and the role of neglected FDI By Latorre, María C.; Yonezawa, Hidemichi
  2. Alternative Simulations of Equalization Transfers in Sudan By NourEldin A. Maglad; Eisa A.M. Elshwin
  3. Mini-symposium on automatic differentiation and its applications in the financial industry By S\'ebastien Geeraert; Charles-Albert Lehalle; Barak Pearlmutter; Olivier Pironneau; Adil Reghai
  4. GitHub API based QuantNet Mining infrastructure in R By Wolfgang Karl Härdle; Lukas Borke
  5. What drives markups? Evolutionary pricing in an agent-based stock-flow consistent macroeconomic model By Pascal Seppecher; Isabelle Salle; Marc Lavoie
  6. Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France (1800-2014) By Garbinti, Bertrand; Goupille-Lebret, Jonathan; Piketty, Thomas
  7. Conference scheduling - a personalized approach By Bart Vangerven; Annette Ficker; Dries Goossens; Ward Passchyn; Frits Spieksma; G. Woeginger
  8. The Impact of Brexit on Foreign Investment and Production By Ellen R. McGrattan; Andrea Waddle
  9. Occupational Choice and Matching in the Labor Market By Mak, Eric; Siow, Aloysius
  11. The Size of Fiscal Multipliers and the Stance of Monetary Policy in Developing Economies By Jair N. Ojeda-Joya; Oscar E. Guzman

  1. By: Latorre, María C.; Yonezawa, Hidemichi
    Abstract: The Transatlantic Trade and Investment Partnership (TTIP) seems to be a doomed half-negotiated trade deal with Donald Trump in power. If it were definitely abandoned, the effects of what could have been the largest trade agreement in history would disappear. In this paper we analyze its potential impact on the world and on insiders and outsiders of the agreement using a Computable General Equilibrium (CGE) model. In our simulation, TTIP consists of reductions of tariffs, non-tariff barriers and a previously neglected component, namely, barriers to Foreign Direct Investment (FDI). The impact of the FDI component would be larger for the US than for the EU. In the US, it would contribute to nearly half of the overall impact of TTIP, while in the EU it would be nearly one third. Insiders would heavily benefit from TTIP but the effects could potentially be very slightly negative for outsiders (Middle East, Sub-Saharan Africa, Latin America, Southeast Asia and Other Advanced Countries), with the exception of the big Asian economies (China, Japan and India). The latter would remain unaffected. However, all the slightly potential negative effects would turn into positive with an “inclusive TTIP” (i.e., one avoiding third country discriminating rules and standards). An inclusive TTIP would benefit both insiders, who would gain more, and outsiders, who would be better off than without the TTIP. Welfare, GDP, wages, as well as aggregate imports and exports of the world economy would clearly increase following either a shallow or a deep TTIP agreement.
    Keywords: Foreign Direct Investment, multinationals, trade agreements, Computable General Equilibrium, CGE, monopolistic competition.
    JEL: C68 F14 F15 F17 F21
    Date: 2017
  2. By: NourEldin A. Maglad; Eisa A.M. Elshwin (Peace University, Sudan)
    Abstract: Federal transfers in the Sudan are key to reducing regional disparities and addressing marginalization. While more resources have been directed to the sub-national levels since the adoption of the federal system in 1991, the lack of transparency and predictability surrounding these transfers has undermined the role of federal transfers to promote regional convergence and reduce financial inequality. The goal of this study is to suggest alternative simulations of equalization transfers using both fiscal needs and fiscal capacity to fill the fiscal gap so as to mitigate the disparities among states. Therefore, four intergovernmental equalization transfers scenarios were proposed using the fiscal gap approach. The results of the simulation and Lorenz curve ranking and Gini Coefficient index suggest that the government should base the transfer program on the fiscal gap measured by the difference between states fiscal needs, proxied by an augmented state needs index, and the state fiscal capacity, proxied by a poverty index. This recommended scenario would reduce the fiscal inequality among the state to its narrowest.
    Date: 2016–07
  3. By: S\'ebastien Geeraert (LJLL); Charles-Albert Lehalle (LJLL); Barak Pearlmutter (LJLL); Olivier Pironneau (LJLL); Adil Reghai
    Abstract: Automatic differentiation is involved for long in applied mathematics as an alternative to finite difference to improve the accuracy of numerical computation of derivatives. Each time a numerical minimization is involved, automatic differentiation can be used. In between formal derivation and standard numerical schemes, this approach is based on software solutions applying mechanically the chain rule to obtain an exact value for the desired derivative. It has a cost in memory and cpu consumption. For participants of financial markets (banks, insurances, financial intermediaries, etc), computing derivatives is needed to obtain the sensitivity of its exposure to well-defined potential market moves. It is a way to understand variations of their balance sheets in specific cases. Since the 2008 crisis, regulation demand to compute this kind of exposure to many different case, to be sure market participants are aware and ready to face a wide spectrum of configurations. This paper shows how automatic differentiation provides a partial answer to this recent explosion of computation to perform. One part of the answer is a straightforward application of Adjoint Algorithmic Differentiation (AAD), but it is not enough. Since financial sensitivities involves specific functions and mix differentiation with Monte-Carlo simulations, dedicated tools and associated theoretical results are needed. We give here short introductions to typical cases arising when one use AAD on financial markets.
    Date: 2017–03
  4. By: Wolfgang Karl Härdle; Lukas Borke
    Abstract: QuantNet being an online GitHub based organization is an integrated environment consisting of different types of statistics-related documents and program codes called Quantlets. The QuantNet Style Guide and the yamldebugger package allow a standardized audit and validation of YAML annotated software repositories within this organization. The behavior statistics of QuantNet users are measured with Web Metrics from Google Analytics. We show how the search queries obtained from Google’s metrics can be used in the test collections in order to calibrate and evaluate the information retrieval (IR) performance of QuantNet’s search engine called QuantNetXploRer. For that purpose, different text mining (TM) models will be examined by means of the new TManalyzer package. Further, we introduce the Validation Pipeline (Vali-PP) and apply it on the YAML data. Vali-PP is a functional multi-staged instrument for clustering analysis, providing multivariate statistical analysis of the co-occurrence distribution of driving factors of the pipeline. The new package rgithubS, which enables a GitHub wide search for code and repositories using the GitHub Search API and which is an essential element of the QuantNet Mining infrastructure, is briefly presented. The TManalyzer results show that for all considered single term queries the number of true positives is maximal in a latent semantic analysis model configuration (LSA50). The Vali-PP analysis indicates that the optimality of the combination LSA50 and hierarchical clustering (HC) applies to 70 − 90% of the cluster sizes for most of the considered quality indices. Further, we can infer that more accurate and comprehensive metadata increases the clustering quality. Subsequently, the findings of our experimental design are implemented into the QuantNetXploRer. The GitHub API driven QuantNetXploRer can be found and mined under
    Keywords: Code Search, Software Repositories, Text Mining, Information Retrieval, Smart Data, YAML, GitHub Search API, Google Analytics, Web Metrics, LSA, GVSM, Cluster Validation, Quality Indices, Validation Pipeline
    JEL: C88 C89
    Date: 2017–03
  5. By: Pascal Seppecher (Centre d'Economie de l'Université de Paris Nord (CEPN)); Isabelle Salle (Utrecht University, School of Economics); Marc Lavoie (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: This paper studies coordination between firms in a multi-sectoral macroeconomic model with endogenous business cycles. Firms are both in competition and interdependent, and set their prices with a markup over unit costs. Markups are heterogeneous and evolve under market pressure. We observe a systematic coordination within firms in each sector, and between each sector. The resulting pattern of relative prices are consistent with the labor theory of value. Those emerging features are robust to technology shocks.
    Keywords: General interdependence, Pricing, Agent-based modeling, Learning
    Date: 2017–01
  6. By: Garbinti, Bertrand; Goupille-Lebret, Jonathan; Piketty, Thomas
    Abstract: This paper combines different sources and methods (income tax data, inheritance registers, national accounts, wealth surveys) in order to deliver consistent, unified wealth distribution series by percentiles for France over the 1800-2014 period, with detailed breakdowns by age, gender, income and assets over the 1970-2014 sub-period. We find a large decline of the top 10% wealth share from the 1910s to the 1980s (from 80-90% of total wealth during the 19th century up until World War 1, down to 50-60% in the 1980s), mostly to the benefit of the middle 40% of the distribution (the bottom 50% wealth share is always less than 10%). Since the 1980s-90s, we observe a moderate rise of wealth concentration, with large fluctuations due to asset price movements. In effect, rising inequality in saving rates and rates of return pushes toward rising wealth concentration, in spite of the contradictory effect of housing prices. We develop a simple simulation model highlighting how the combination of unequal saving rates, rates of return and labor earnings leads to large multiplicative effects and high steady-state wealth concentration. Small changes in the key parameters appear to matter a lot for long-run inequality. We discuss the conditions under which rising concentration is likely to continue in the coming decades.
    Keywords: saving rate; steady-state; Wealth Inequality
    JEL: D31 E21 N34
    Date: 2017–02
  7. By: Bart Vangerven; Annette Ficker; Dries Goossens; Ward Passchyn; Frits Spieksma; G. Woeginger
    Abstract: Scientific conferences have become an essential part of academic research and require significant investments (e.g. time and money) from their participants. It falls upon the organizers to develop a schedule that allows the participants to attend the talks of their interest. We present a combined approach of assigning talks to rooms and time slots, grouping talks into sessions, and deciding on an optimal itinerary for each participant. Our goal is to maximize attendance, taking into account the common practice of session hopping. On a secondary level, we accommodate presenters’ availabilities. We use a hierarchical optimization approach, sequentially solving integer programming models, which has been applied to construct the schedule of the MathSport (2013), MAPSP (2015) and ORBEL (2017) conferences.
    Keywords: Conference scheduling, Computational complexity, Case study, Integer programming
    Date: 2017–03
  8. By: Ellen R. McGrattan; Andrea Waddle
    Abstract: In this paper, we estimate the impact of increasing costs on foreign producers following a withdrawal of the United Kingdom from the European Union (popularly known as Brexit). Our predictions are based on simulations of a multicountry neoclassical growth model that includes multinational firms investing in research and development (R&D), brands, and other intangible capital that is used nonrivalrously by their subsidiaries at home and abroad. We analyze several post-Brexit scenarios. First, we assume that the United Kingdom unilaterally imposes tighter restrictions on foreign direct investment (FDI) from other E.U. nations. With less E.U. technology deployed in the United Kingdom, U.K. firms increase investment in their own R&D and other intangibles, which is costly, and welfare for U.K. citizens is lower. If the European Union remains open, its citizens enjoy a modest gain from the increased U.K. investment since it can be costlessly deployed in subsidiaries throughout Europe. If instead we assume that the European Union imposes the same restrictions on U.K. FDI, then E.U. firms invest more in their own R&D, benefiting the United Kingdom. With costs higher on both U.K. and E.U. FDI, we predict a significant fall in foreign investment and production by U.K. firms. The United Kingdom increases international lending, which finances the production of others both domestically and abroad, and inward FDI rises. U.K. consumption falls and leisure rises, implying a negligible impact on welfare. In the European Union, declines in investment and production are modest, but the welfare of E.U. citizens is significantly lower. Finally, if, during the transition, the United Kingdom reduces current restrictions on other major foreign investors, such as the United States and Japan, U.K. inward FDI and welfare both rise significantly.
    JEL: F23 F41 O33 O34
    Date: 2017–03
  9. By: Mak, Eric (Shanghai University of Finance and Economics); Siow, Aloysius (University of Toronto)
    Abstract: Integrating Roy with Becker, this paper studies occupational choice and matching in the labor market. Our model generates occupation earnings distributions which are right skewed, have firm fixed effects, and large changes in aggregate earnings inequality without significant changes in within firm inequality. The estimated model fits the earnings distribution both across and within firms in Brazil in 1999. It shows that the recent decrease in aggregate Brazilian earnings inequality is largely due to the increase in her educational attainment over the same years. A simulation of skilled biased technical change in the model also qualitatively fits the recent changes in earnings inequality in the United States.
    Keywords: occupational choice, matching, earnings distribution, inequality
    JEL: J31
    Date: 2017–02
  10. By: Farhad Daruwala; Frank T. Denton; Dean C. Mountain
    Abstract: We consider optional TOU (time-of-use) pricing for residential consumers as an alternative to a single TOU or flat rate structure offered by a publicly regulated electricity supplier. A general equilibrium model is developed and used to explore and quantify the effects of optional pricing on welfare, consumption, and production costs. The model assumes that households can be classified into internally homogeneous groups with differing utility functions, incomes, demand elasticities, and committed consumption requirements. Substitution for electricity among TOU periods and between electricity and other goods is allowed for in the model on the demand side, and differing TOU-specific marginal costs on the supply side. The supplier in the model offers to each household a menu of possible rate sets obtained by maximizing a collective welfare function subject to three types of restriction: Pareto efficiency (no household is worse off under the proposed pricing scheme than under the current pricing scheme); incentive compatibility (every household weakly prefers its set of rates to the sets chosen by other households); breakeven supplier revenue (aggregate revenue must equal aggregate cost). The model is calibrated realistically with three household groups and three distinct TOU costing periods, and used in a series of simulation experiments, including experiments with alternative demand elasticities and marginal cost parameters. The use of optional pricing is shown to increase overall consumer welfare and reduce average production cost. However, the distribution of welfare effects can be uneven, with the highest income group dominating the market to the relative disadvantage of the lowest group. To deal with that situation an alternative strategy with a targeted rate structure for the lowest income group is proposed, corresponding to a modified version of the model specified in which some incentive compatibility restrictions are relaxed. Simulations show that the strategy can be effective in bringing about a more equitable distribution of welfare gains while still maintaining optional TOU pricing.
    JEL: D11 D12 D82 Q41 D58 D61 L94
    Date: 2017–02
  11. By: Jair N. Ojeda-Joya (Banco de la Republica, Bogotá D.C.); Oscar E. Guzman (Office of the National Comptroller, Bogotá D.C.)
    Abstract: In this paper we estimate the effect of government consumption shocks on GDP using a panel of 21 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business-cycle phases, and monetary policy stances. In addition, we perform counterfactual simulations to analyze the possible gains from fiscal-monetary policy coordination. The results imply that government consumption shocks are usually followed by monetary policy tightening in developing economies with flexible regimes. Our simulations show that this reaction partially explains the presence of low fiscal multipliers in these economies. On the other hand, we find that government consumption shocks have better multipliers in developing economies during fixed regimes, economic booms and monetary expansions. In particular, implementing fiscal programs during monetary expansions seems to improve significantly their economic stimulus.
    Keywords: Fiscal Policy, Monetary Policy, Structural Vector Autoregression, Exchange Rate Regime, Panel VAR
    JEL: E62 E63 F32
    Date: 2017–03

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