nep-cmp New Economics Papers
on Computational Economics
Issue of 2018‒04‒30
eight papers chosen by
Stan Miles
Thompson Rivers University

  2. A numerical evaluation of the bounded degree sum-of-squares hierarchy of Lasserre, Toh, and Yang on the pooling problem By Marandi, Ahmadreza; Dahl, Joachim; de Klerk, Etienne
  3. Using automated algorithm configuration to improve the optimization of decentralized energy systems modeled as large-scale, two-stage stochastic programs By Schwarz, Hannes; Kotthoff, Lars; Hoos, Holger; Fichtner, Wolf; Bertsch, Valentin
  4. Matching frictions, credit reallocation and macroeconomic activity: how harmful are financial crises? By Emanuele Ciola; EDOARDO GAFFEO; Mauro Gallegati
  5. Economic Effects of Free Trade Agreements in Northeast Asia: CGE Analysis with the GTAP 9.0a Data Base By Enkhbayar Shagdar; Tomoyoshi Nakajima
  6. Supply Function Equilibrium over a Constrained Transmission Line I: Calculating Equilibria By Ruddell, Keith
  7. Do Financial Constraints Hamper Environmental Innovation Diffusion? An Agent-Based Approach By Paola D’Orazio; Marco Valente
  8. The impact of margin trading on share price evolution: A cascading failure model investigation By Ya-Chun Gao; Huai-Lin Tang; Shi-Min Cai; Jing-Jing Gao; H. Eugene Stanley

  1. By: Wolfgang Britz; Roberto Roson
    Abstract: We motivate and detail the newly developed G-RDEM recursive-dynamic Computable General Equilibrium model as a tool for long-term counterfactual analysis and baseline generation from given GDP and population projections. It encompasses an AIDADS demand system with non-linear Engel curves, debt accumulation from foreign saving and introduces sector specific productivity changes, endogenous aggregate saving rates, as well as time-varying input-output coefficients. Parameters for these relationships are econometrically estimated or taken from published work. The core of the model is derived from the GTAP standard model and seamlessly incorporated into the modular and flexible CGEBox modelling platform. Accordingly, it can be applied with various other extensions such as GTAP-AEZ, GTAP-Water or a regional breakdown for Europe to 280 NUTS2 regions. G-RDEM maintains the flexible aggregation from the GTAP data base. It is open source, encoded in GAMS and can be steered by a Graphical User Interface, which also encompasses a tool to analyse results with tables, graphs and maps. Existing GDP and population projections for the Socio-Economic Pathways 1-5 can be directly incorporated for baseline construction. A comparison of the generated long-term structural composition of the economy against a simple recursive-dynamic variant, using the basic CDE demand system of the standard GTAP model, uniform productivity growth, fixed saving rates and technology parameters, and no debt accumulation shows that G-RDEM brings about much more plausible results, as well as a more realistic, internally consistent representation of the economic structure in a hypothetical future.
    Keywords: Computable General Equilibrium models; Long-run economic scenarios; Structural change.
    JEL: C68 C82 C88 D58 E17 F43 O11 O40
    Date: 2018
  2. By: Marandi, Ahmadreza (Tilburg University, School of Economics and Management); Dahl, Joachim; de Klerk, Etienne (Tilburg University, School of Economics and Management)
    Abstract: The bounded degree sum-of-squares (BSOS) hierarchy of Lasserre, Toh, and Yang [EURO J. Comput. Optim., 2015] constructs lower bounds for a general polynomial optimization problem with compact feasible set, by solving a sequence of semi-definite programming (SDP) problems. Lasserre, Toh, and Yang prove that these lower bounds converge to the optimal value of the original problem, under some assumptions. In this paper, we analyze the BSOS hierarchy and study its numerical performance on a specific class of bilinear programming problems, called pooling problems, that arise in the refinery and chemical process industries.
    Date: 2018
  3. By: Schwarz, Hannes; Kotthoff, Lars; Hoos, Holger; Fichtner, Wolf; Bertsch, Valentin
    Abstract: The optimization of decentralized energy systems is an important practical problem that can be modeled using stochastic programs and solved via their large-scale, deterministic equivalent formulations. Unfortunately, using this approach, even when leveraging a high degree of parallelism on large high-performance computing (HPC) systems, finding close-to-optimal solutions still requires long computation. In this work, we present a procedure to reduce this computational effort substantially, using a stateof-the-art automated algorithm configuration method. We apply this procedure to a well-known example of a residential quarter with photovoltaic systems and storages, modeled as a two-stage stochastic mixed-integer linear program (MILP). We demonstrate substantially reduced computing time and costs of up to 50% achieved by our procedure. Our methodology can be applied to other, similarly-modeled energy systems.
    Keywords: OR in energy,large-scale optimization,stochastic programming,uncertainty modeling,automated algorithm configuration,sequential model-based algorithm configuration
    Date: 2017
  4. By: Emanuele Ciola; EDOARDO GAFFEO; Mauro Gallegati
    Abstract: This paper develops a macroeconomic model of real- nancial market interactions in which the credit and the business cycles reinforce each other according to a bidirectional causal relationship. We do so in the context of a computational agent-based framework, where the channelling of funds from savers to investors occurring through intermediaries is a ected by information frictions. Since banks compete in both the deposit and the loan markets, the whole dynamics is driven by endogenous uctuations in the size of the intermediaries balance sheet. We use the model to show that nancial crisis are particularly harmful when hitting in phase with a real recession, and that when this occurs the loss in real output is permanent.
    Keywords: Agent-based model, matching frictions, banking, nancial crises
    JEL: E32 E37 G01
    Date: 2018
  5. By: Enkhbayar Shagdar (Economic Research Institute for Northeast Asia (ERINA)); Tomoyoshi Nakajima (Economic Research Institute for Northeast Asia (ERINA))
    Abstract: Despite growing trade and economic relations among the countries in the Northeast Asian (NEA) region, there are only two bilateral free trade agreements in effect currently. The China?ROK Free Trade Agreement entered into force on 20 December 2015 and the Japan?Mongolia Economic Partnership Agreement (EPA) became effective on 7 June 2016. However, several EPAs and free trade agreements (FTAs) are under negotiation or have prospects to emerge among not only the countries in the region, but also surrounding regions and countries. An analysis of the economic effects of the ongoing FTA (China?Japan?Korea Trilateral Free Trade Agreement (CJK FTA)), and several other prospective FTAs?Northeast Asia Preferential Free Trade Agreement (NEA FTA); Northeast Asia plus the Eurasian Economic Union (EAEU) Preferential Free Trade Area (NEA+EAEU FTA); and Northeast Asia plus the Regional Comprehensive Economic Partnership (RCEP) plus the EAEU Preferential Free Trade Area (NEA+RCEP+EAEU FTA)?using the standard CGE Model and GTAP Data Base 9.0a revealed that all parties of the agreements will benefit from the formation of these free trade agreements, having welfare gains and real GDP expansions regardless of international capital mobility status?i.e. whether the capital is internationally mobile or not. Moreover, the results indicated that for the NEA region as a whole, the NEA FTA is preferable to the CJK FTA alone, and it would be even better off with the formation of wider free trade areas, such as with the other RCEP and EAEU members.
    Keywords: free trade; CGE analysis
    JEL: F15 C68
  6. By: Ruddell, Keith (Research Institute of Industrial Economics (IFN))
    Abstract: Competition between oligopolist electricity generators is inhibited by transmission constraints. I present a supply function equilibrium (SFE) model of an electricity market with a single lossless, but constrained, transmission line. The market admits equilibria in which generator withhold energy in order to induce congestion, which further increases their local market power. Under appropriate assumptions on cost and demand functions, I obtain a planar autonomous system of ordinary differential equations for the SFE. Computational methods are developed to solve the system while respecting monotonicity constraints on the supply functions. Using these methods I can calculate SFE in network markets that range from fully isolated to fully integrated. I also find network markets for which the SFE is not unique.
    Keywords: Supply function equilibrium; Electricity markets; Market power; Locational pricing of electricity
    JEL: C62 C65 D43 L13 L94
    Date: 2018–04–20
  7. By: Paola D’Orazio (Lehrstuhl für Makroökonomik, Faculty of Economics and Management, Fakultät für Wirtschaftswissenschaft, Ruhr-Universität Bochum, Universitätsstraße 150, 44801 Bochum (Germany).); Marco Valente (Dipartimento di Ingegneria Industriale e dell’Informazione e di Economia, University of L’Aquila (Italy); LEM Sant’Anna, Pisa (Italy); SPRU, University of Sussex (UK) and Ruhr-Universität Bochum (Germany).)
    Abstract: We develop a model that combines evolutionary economics concepts and methods with environmental economics concerns. The model is populated by consumers, heterogeneous firms, and a financial sector and is used to investigate the dynamic interactions between the demand and supply side, and the role played by binding financial constraints, in the diffusion of environmental innovations. The aim of the model is to understand how environmental goals can be effectively promoted and achieved in presence of a financial sector whose lending attitude is guided by long-termism rather than shorttermism. We show that financial constraints act as a deterring barrier and affect firms’ innovation strategies as well as the evolution of technological paradigms. When financial constraints are less binding, firms do not perceive hindrances to the adoption of eco-innovation and, as a result, the presence of the average green technology in the market increases.
    Keywords: Environmental Innovation, Agent-based Computational Economics, Financial Barriers, Green Finance, Short-termism, Deterring barriers, Credit constraints.
    Date: 2018–04
  8. By: Ya-Chun Gao; Huai-Lin Tang; Shi-Min Cai; Jing-Jing Gao; H. Eugene Stanley
    Abstract: Margin trading in which investors purchase shares with money borrowed from brokers is blamed to be a major cause of the 2015 Chinese stock market crash. We propose a cascading failure model and examine how an increase in margin trading increases share price vulnerability. The model is based on a bipartite graph of investors and shares that includes four margin trading factors, (i) initial margin $k$, (ii) minimum maintenance $r$, (iii) volatility $v$, and (iv) diversity $s$. We use our model to simulate margin trading and observe how the share prices are affected by these four factors. The experimental results indicate that a stock market can be either vulnerable or stable. A stock market is vulnerable when an external shock can cause a cascading failure of its share prices. It is stable when its share prices are resilient to external shocks. Furthermore, we investigate how the cascading failure of share price is affected by these four factors, and find that by increasing $v$ and $r$ or decreasing $k$ we increase the probability that the stock market will experience a phase transition from stable to vulnerable. It is also found that increasing $s$ decreases resilience and increases systematic risk. These findings could be useful to regulators supervising margin trading activities.
    Date: 2018–04

This nep-cmp issue is ©2018 by Stan Miles. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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