nep-cmp New Economics Papers
on Computational Economics
Issue of 2018‒06‒11
seven papers chosen by

  1. An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines By Fanti, Lucrezia
  2. Sustainability of the pension system in Macedonia: A comprehensive analysis and reform proposal with MK-PENS - dynamic microsimulation model By Blagica Petreski; Pavle Gacov
  3. Land Use Regulations, Migration and Rising House Price Dispersion in the U.S. By Wukuang Cun; M. Hashem Pesaran
  4. Micro and macro policies in the Keynes +Schumpeter evolutionary models By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  5. An agent-based model of intra-day financial markets dynamics By Jacopo Staccioli; Mauro Napoletano
  6. Understanding Flash Crash Contagion and Systemic Risk: A Micro-Macro Agent-Based Approach By James Paulin; Anisoara Calinescu; Michael Wooldridge
  7. Central Bank sentiment and policy expectations By Fabien Labondance; Paul Hubert

  1. By: Fanti, Lucrezia
    Abstract: This paper introduces the classical idea about the so-called directed and induced technical change (ITC) within a Keynesian demand-side and evolutionary endogenous growth model in order to analyze the interplay among technical change, long-run economic growth and functional income distribution. An ITC process is analyzed within an Agent-Based Stock-Flow Consistent (AB-SFC) model, wherein credit-constrained heterogeneous firms choose both the intensity and the direction of the innovation towards a labor- or capital-saving choice of technique. In the long-run, the model reproduces the so-called Kaldor stylized facts (i.e. with a purely labor-saving technical change), however during the transitional phase the model shows a labor-saving/capital-using innovation pattern, as the aggregate output-capital ratio decreases until it stabilizes in the long-run, as well as declining labor share for long time periods and we can ascribe these evidences mainly to the directed technical change process. In order to stress the effective role of the innovation bias on the model dynamics, we compare the baseline scenario with a counterfactual scenario wherein a neutral technical progress is at work.
    Keywords: Agent-Based Macroeconomics; Stock-Flow Consistent Models; Induced Technical Change; Directed Innovation; Choice of Techniques; Labor Share; Growth and Distribution.
    JEL: E24 E25 O33 O41
    Date: 2018–03–10
  2. By: Blagica Petreski; Pavle Gacov
    Date: 2018–03
  3. By: Wukuang Cun; M. Hashem Pesaran
    Abstract: This paper develops a dynamic spatial equilibrium model of regional housing markets in which house prices are jointly determined with migration flows. Agents optimize period-by-period and decide whether to remain where they are or migrate to a new location at the start of each period. The gain from migration depends on the differences in incomes, housing and migration costs. The agent’s optimal location choice and the resultant migration process is shown to be Markovian with the transition probabilities across all location pairs given as non-linear functions of income and housing cost differentials, which are endogenously determined. On the supply side, in each location the construction firms build new houses by combing land and residential structures. The regional land supplies are exogenously given. When a tightening of regional land-use regulation reduces local housing supply, upward pressure on house prices created by excess housing demand cascades to other locations via migration. It is shown that the deterministic version of the model has a unique equilibrium and a unique balanced growth path. We estimate the state-level supplies of new residential land from the model using housing market and urban land acreage data. These estimates are shown to be significantly negatively correlated with the Wharton Residential Land Use Regulatory Index. The model can simultaneously account for the rise in house price dispersion and the interstate migration in the U.S. during the period 1976-2014. Counterfactual simulations suggest that reducing either land supply differentials or migration costs could significantly lower house price dispersion. The model predicts substantially smaller impacts of land-use deregulation on population reallocation as compared to recent existing models of housing and migration that assume population are perfectly mobile.
    Keywords: house price dispersion, endogenous location choice, interstate migration, land-use restriction, spatial equilibrium
    JEL: E00 R23 R31
    Date: 2018
  4. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Laboratory of Economics and Management (LEM)); Tania Treibich (Maastricht University)
    Abstract: Abstract This paper presents the family of the Keynes+Schumpeter (K+S, cf. Dosi et al, J Econ Dyn Control 34 1748–1767 2010, J Econ Dyn Control 37 1598–1625 2013, J Econ Dyn Control 52 166–189 2015) evolutionary agent-based models, which study the effects of a rich ensemble of innovation, industrial dynamics and macroeconomic policies on the long-term growth and short-run fluctuations of the economy. The K+S models embed the Schumpeterian growth paradigm into a complex system of imperfect coordination among heterogeneous interacting firms and banks, where Keynesian (demand-related) and Minskian (credit cycle) elements feed back into the meso and macro dynamics. The model is able to endogenously generate long-run growth together with business cycles and major crises. Moreover, it reproduces a long list of macroeconomic and microeconomic stylized facts. Here, we discuss a series of experiments on the role of policies affecting i) innovation, ii) industry dynamics, iii) demand and iv) income distribution. Our results suggest the presence of strong complementarities between Schumpeterian (technological)
    Keywords: Keynes; Schumpeter; Evolutionary models
    Date: 2017–01
  5. By: Jacopo Staccioli; Mauro Napoletano
    Abstract: We propose a parsimonious agent-based model of a financial market at the intra-day time scale that is able to jointly reproduce many of the empirically validated stylised facts. These include properties related to returns (leptokurtosis, absence of linear autocorrelation, volatility clustering), trading volumes (volume clustering, correlation between volume and volatility), and timing of trades (number of price changes, autocorrelation of durations between subsequent trades, heavy tail in their distribution, order-side clustering). With respect to previous constributions we introduce a strict event scheduling borrowed from the Euronext exchange, and an endogenous rule for traders' participation. We find that the latter proves crucial for matching our target stylised facts.
    Keywords: Intraday financial dynamics, Stylized facts, Agent-based artificial stock markets, Market microstructure, High-Frequency Trading
    Date: 2018–06–01
  6. By: James Paulin; Anisoara Calinescu; Michael Wooldridge
    Abstract: The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a hybrid micro-macro agent-based model, where price impact arises endogenously through the limit order placement activity of algorithmic traders. Our novel hybrid microscopic and macroscopic model allows us to quantify systemic risk not just in terms of system stability, but also in terms of the speed of financial distress propagation over intraday timescales. We find that systemic risk is strongly dependent on the behaviour of algorithmic traders, on leverage management practices, and on network topology. Our results demonstrate that, for high-crowding regimes, contagion speed is a non-monotone function of portfolio diversification. We also find the surprising result that, in certain circumstances, increased portfolio crowding is beneficial to systemic stability. We are not aware of previous studies that have exhibited this phenomenon, and our results establish the importance of considering non-uniform asset allocations in future studies. Finally, we characterise the time window available for regulatory interventions during the propagation of flash crash distress, with results suggesting ex ante precautions may have higher efficacy than ex post reactions.
    Date: 2018–05
  7. By: Fabien Labondance (Observatoire français des conjonctures économiques); Paul Hubert (Observatoire français des conjonctures économiques)
    Abstract: We explore empirically the theoretical prediction that optimism or pessimism have aggregate effects, in the context of monetary policy. First, we quantify the tone conveyed by FOMC policymakers in their statements using computational linguistics. Second, we identify sentiment as the unpredictable component of tone, orthogonal to fundamentals, expectations, monetary shocks and investors’ sentiment. Third, we estimate the impact of FOMC sentiment on the term structure of private interest rate expectations using a high-frequency methodology and an ARCH model. Optimistic FOMC sentiment increases policy expectations primarily at the one-year maturity. We also find that sentiment affects inflation and industrial production beyond monetary shocks.
    Keywords: Animal spirits; Optimism; Confidence; FOMC; Interest rate expectations; Central Bank Communication; Eurpean Central Bank; Aggregate Effects
    JEL: E43 E52 E58
    Date: 2017–03

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.