nep-cmp New Economics Papers
on Computational Economics
Issue of 2018‒11‒19
eleven papers chosen by

  1. Structural change and poverty reduction in Ethiopia: Economy-wide analysis of the evolving role of agriculture By Dorosh, Paul; Thurlow, James; Kebede, Frehiwot Worku; Ferede, Tadele; Taffesse, Alemayehu Seyoum
  2. MegBec - Un modèle d’équilibre général calculable multirégional du Québec By André Lemelin; Véronique Robichaud
  3. Deep Learning can Replicate Adaptive Traders in a Limit-Order-Book Financial Market By Arthur le Calvez; Dave Cliff
  4. Economic and environmental implications of a target for bioplastics consumption: A CGE analysis By Haddad, S.; Escobar, N.; Britz, W.
  5. Quality Assessment of Microsimulation Models: The Case of EUROMOD By Sutherland, Holly
  6. An agent based early warning indicator for financial market instability By Vidal-Tomás, David; Alfarano, Simone
  7. A Comparison of the Economics Impacts of Conditional and Unconditional Cash Transfers in Egypt By Imane Helmy; Christian Richter; Khalid Siddig; Hebatallah Ghoneim
  8. Research note: The distributional impact of local social benefits in Croatia By Pezer, Martina; Bezeredi, Slavko; Leventi, Chrysa
  9. 所得階層別一般均衡型世代重複シミュレーションモデルの開発 By 島澤, 諭; 難波, 了一; 堤, 雅彦; 小黒, 一正
  10. Life cycles with Endogenous Time Allocation and Age-Dependent Mortality By Manuel Guerra; João Pereira; Miguel St. Aubyn
  11. Perturbations in DSGE Models: Odd Derivatives Theorem By Sherwin Lott

  1. By: Dorosh, Paul; Thurlow, James; Kebede, Frehiwot Worku; Ferede, Tadele; Taffesse, Alemayehu Seyoum
    Abstract: This paper explores these issues for Ethiopia utilizing an economy-wide computable general equilibrium (CGE) model based on a detailed social accounting matrix (SAM). We present the results of four alternative investment scenarios -- faster investment in i) cities; ii) crop agriculture; iii) the rural non-farm sector and agro-industry; and iv) livestock. The simulations suggest that investments in cities generate faster economic growth and structural transformation. However, given the large share of the population with incomes linked to agriculture and the rural economy, investments in the rural economy are likely to continue to be more pro-poor than urban public investments through the mid-2020s. After the mid-2020s, investments in cities become more pro-poor. In short, though rapid economic growth and structural transformation have diminished the relative importance of the agricultural sector in Ethiopia’s economy, continued public investments in agriculture and the broader agri-food system remain crucial for equity and poverty alleviation in Ethiopia, as well as for reducing food import dependency.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA ; poverty; agricultural sector; public investment; rural urban relations; economic growth ; computable general equilibrium (CGE) model; social accounting matrix (SAM)
    Date: 2018
  2. By: André Lemelin; Véronique Robichaud
    Abstract: This document presents the MegBec multiregional model of Quebec, a recursive dynamic computable general equilibrium (CGE) model with 16 “analytic” regions. The model is based on a social accounting matrix (SAM) with 44 industries and 63 products. The first part of the document describes how the SAM was constructed. First, a SAM for Quebec as a whole was elaborated, using the 2011 Statistics Canada supply and use tables. Regional SAMs were built from that one by distributing values across regions following several key indicators, particularly the regional GDP estimates of the Institut de la statistique du Québec. The resulting discrepancy in each region between salaries received and paid is attributed to worker commuting; origin-destination flows were estimated using cross-entropy minimization from Statistics Canada’s 2011 Census commuting data. Discrepancies between regional absorption and production are attributed to interregional trade; bi-lateral flows are generated by simulation using a gravity model. Attraction factors – key parameters in the gravity model – are obtained by aggregating attraction factors constructed at the finer Municipalité Régionale de Comté (MRC) spatial scale, according to network distances, in minutes, between population-weighted centroids. The second part of the document persents the model itself, whose specification is more or less standard for dynamic multiregional CGE models. In particular, trade between regions follows the Armington imperfect substituability hypothesis: supply is apportioned according to constant-elasticity-of-transformation (CET) functions, and demand according to constant-elasticity-of-substitution (CES) functions. Regional labor markets are characterized by the presence of unemployment, the rate of which depends on the level of wages, following a wage curve. Interregional worker commuting flows are logistic functions of regional wage rates. The document includes several appendices, one of which describes the reference scenario and the closure rules that are applied by default in the model. Ce document présente le modèle multirégional du Québec MegBec, un modèle d’équilibre général calculable (MEGC) dynamique séquentiel où l’on distingue 16 régions dites « régions analytiques ». Il s’appuie sur une matrice de comptabilité sociale (MCS) avec 44 industries et 63 produits. La première partie du document décrit le processus d’élaboration de la MCS. D’abord on a élaboré une MCS du Québec dans son ensemble, à partir des tableaux de ressources-emplois de 2011 de Statistique Canada. À partir de cette MCS, les matrices régionales ont été construites en répartissant les valeurs entre régions selon plusieurs clés, en particulier les estimations du PIB des régions de l’Institut de la statistique du Québec. L’écart qui en résulte dans chaque région entre salaires reçus et salaires payés est attribué au navettage des travailleurs; les flux origine-destination ont été estimés par la méthode de minimisation de l’entropie croisée à partir de données de navettage du recensement de 2011 de Statistique Canada. Les écarts entre l’absorption et la production régionales par produit sont attribués aux échanges interrégionaux, qui sont générés par simulation au moyen d’un modèle gravitaire. Les facteurs d’attractivité, paramètres critiques du modèle gravitaire, sont obtenus par agrégation de facteurs d’attractivité construits à l’échelle plus fine des MRC, selon les distances réticulaires en minutes entre centroïdes pondérés par la population. La deuxième partie du document présente le modèle lui-même, dont la spécification est grosso modo conforme à la structure classique des MEGC multirégionaux dynamiques. En particulier, le commerce entre les régions suit l’hypothèse de substituabilité imparfaite d’Armington : l’offre se distribue suivant des fonctions de distribution de l’offre à élasticité de transformation constante (CET) et la demande suivant des fonctions de répartition de la demande à élasticité de substitution constante (CES). Les marchés régionaux du travail sont caractérisés par la présence de chômage, dont le taux dépend du niveau des salaires, selon une courbe salaire-chômage (wage curve). Le navettage interrégional des travailleurs suit un modèle de fonction logistique des salaires régionaux. Le document compte plusieurs annexes, dont l’une décrit le scénario de référence et expose les règles de fermeture appliquées par défaut dans le modèle.
    Keywords: Multiregional model,Computable general equilibrium,Regional social accounting matrices,Quebec, Modèle multirégional,Équilibre général calculable,Matrices de comptabilité sociale régionales,Québec
    JEL: C68 C82 D58 R13 R15
    Date: 2018–03–29
  3. By: Arthur le Calvez; Dave Cliff
    Abstract: We report successful results from using deep learning neural networks (DLNNs) to learn, purely by observation, the behavior of profitable traders in an electronic market closely modelled on the limit-order-book (LOB) market mechanisms that are commonly found in the real-world global financial markets for equities (stocks & shares), currencies, bonds, commodities, and derivatives. Successful real human traders, and advanced automated algorithmic trading systems, learn from experience and adapt over time as market conditions change; our DLNN learns to copy this adaptive trading behavior. A novel aspect of our work is that we do not involve the conventional approach of attempting to predict time-series of prices of tradeable securities. Instead, we collect large volumes of training data by observing only the quotes issued by a successful sales-trader in the market, details of the orders that trader is executing, and the data available on the LOB (as would usually be provided by a centralized exchange) over the period that the trader is active. In this paper we demonstrate that suitably configured DLNNs can learn to replicate the trading behavior of a successful adaptive automated trader, an algorithmic system previously demonstrated to outperform human traders. We also demonstrate that DLNNs can learn to perform better (i.e., more profitably) than the trader that provided the training data. We believe that this is the first ever demonstration that DLNNs can successfully replicate a human-like, or super-human, adaptive trader operating in a realistic emulation of a real-world financial market. Our results can be considered as proof-of-concept that a DLNN could, in principle, observe the actions of a human trader in a real financial market and over time learn to trade equally as well as that human trader, and possibly better.
    Date: 2018–11
  4. By: Haddad, S.; Escobar, N.; Britz, W.
    Abstract: Private and public initiatives worldwide encourage a shift towards more sustainable production and consumption patterns, including bioplastics. These are, however, essentially produced from food crops. Given the manifold support schemes for the promotion of bioenergy, bioplastic producers also claim for targeted policies. This can further increase competition for biomass globally, with unintended consequences for food prices and the environment. A comprehensive analysis of the effects of a 5% target for bioplastic consumption is presented based on Computable General Equilibrium (CGE) linked to environmental indicators. Both fossil-based plastics and bioplastics are implemented in the GTAP 9 database. Two scenarios are defined: scenario 1 increases consumption taxes on fossil-based plastics while scenario 2 decreases them for bioplastics . Although both generate an expansion of the sector, the tax performs better in economic and also environmental terms, partially due to the substitution for oilseeds in the major producing regions, which even generates afforestation in carbon-rich areas. Only the target in scenario 1 generates an increase in GDP per CO2-eq. saved at global scale. The study shows the usefulness of CGE models as a tool to analyze cost-effectiveness of Bioeconomy-related policies, provided that emerging bio-based sectors and novel technologies are adequately implemented. Acknowledgement : This research has been funded by the German Federal Ministry of Education and Research within the project STRIVE (Sustainable Trade and Innovation Transfer in the Bioeconomy). More information at:
    Keywords: Environmental Economics and Policy
    Date: 2018–07
  5. By: Sutherland, Holly
    Abstract: Assessing the quality of microsimulation models is an important contributing factor for motivating their use in both academic and policy environments. This is particularly relevant for EUROMOD, the tax-benefit microsimulation model for the European Union, because it is intended to be widely used. This paper explains how the quality of EUROMOD is assessed. It focusses on the validity and scope of results as particularly important dimensions of quality, and on the transparency with which this assessment is done. It also provides evidence on the extent and breadth of the use of EUROMOD. Some of the key trade-offs between different aspects of quality are identified and the paper concludes with a view on the appropriate division of responsibility for quality assessment, between model developers and users.Â
    Date: 2018–10–30
  6. By: Vidal-Tomás, David; Alfarano, Simone
    Abstract: Inspired by the Bank of America Merrill Lynch Global Breath Rule, we propose an investor sentiment index based on the collective movement of stock prices in a given market. We show that the time evolution of the sentiment index can be reasonably described by the herding model proposed by Kirman on his seminal paper "Ants, rationality and recruitment" (Kirman, 1993). The correspondence between the index and the model allows us to easily estimate its parameters. Based on the model and the empirical evolution of the sentiment index, we propose an early warning indicator able to identify optimistic and pessimistic phases of the market. As a result, investors and policymakers can set different strategies anticipating financial market instability. The former, reducing the risk of their portfolio, and the latter, setting more efficient policies to avoid the effect of financial crashes on the real economy. The validity of our results is supported by means of a robustness analysis showing the application of the early warning indicator in eight different stock markets.
    Keywords: Herding behaviour, Kirman model, Financial market
    JEL: C61 D84 G10
    Date: 2018–10–24
  7. By: Imane Helmy (Faculty of Management Technology, German University in Cairo); Christian Richter (Faculty of Management Technology, German University in Cairo); Khalid Siddig (Faculty of Lif Sciences, Humboldt University in Berlin); Hebatallah Ghoneim (Faculty of Management Technology, German University in Cairo)
    Abstract: This paper uses a computable general equilibrium model to distinguish between the economy-wide impact of targeting conditional and unconditional cash transfer to Egyptian households following the full removal of subsidies. Analyzing the impact on the middle class whose vulnerability increased during the reform is another addition of this paper that makes an empirical contribution to the literature discussing the effectiveness of cash transfer compared to price subsidies. The STAGE model is calibrated on the Egyptian Social Accounting Matrix 2012/13. The results show that the removal of subsidies will have the largest negative impact on the consumption of middle class. Moreover, Conditional Cash Transfer (CCT) maintains the best policy for mitigating the harmful effect of removing subsidies. It has a positive impact on the demand for labor in education and health sectors where the majority of labor is skilled males and semi-skilled females. Similarly, introducing CCT will boost production in health and education sectors.
    Keywords: Subsidies Reform, Conditional Cash Transfer, CGE model
    JEL: C68 R20 O21
    Date: 2018–09
  8. By: Pezer, Martina; Bezeredi, Slavko; Leventi, Chrysa
    Abstract: The aim of this research note is to analyse the distributional impact of five types of local social benefits (compensation for housing costs, old-age income supplement, grant for a newborn child, kindergarten subsidy and city transport subsidy) in the four major Croatian cities – Zagreb, Split, Rijeka and Osijek – which is a first analysis of this kind for Croatia. Using miCROmod – the Croatian tax-benefit microsimulation model, a comparative analysis of benefits and their generosity has been conducted; their income redistribution and poverty reduction effects have also been investigated. Results reveal that, in all local benefit systems considered, the most significant resources are devoted to the city transport subsidy and the kindergarten subsidy. If we compare the per capita values, the most generous benefits are found in Zagreb, followed by Rijeka, Osijek and Split. Also, social protection benefits of Zagreb and Rijeka are the most redistributive, achieving the highest poverty headcount reduction.Â
    Date: 2018–10–28
  9. By: 島澤, 諭; 難波, 了一; 堤, 雅彦; 小黒, 一正
    Abstract: 本稿の目的は、財政健全化や社会保障制度改革等の政策変更により家計が被る影響が、世代間のみならず世代内でどのような点で異なり、どのような点で類似しているのかなどについて分析を行うために資するよう、家計を生年だけではなく所得階層に区分し、同一世代内における家計の異質性を明示的に考慮した一般均衡型世代重複シミュレーションモデルの開発を行うことにある。あわせて、現在の財政スタンスが持続可能か否かについてシミュレーションし、世代別・所得階層別生涯純税負担率の推計を行った。その結果、現在の財政スタンスを継続した場合、2040年に政府債務残高比率が457%に達したところで限界が訪れ、2041年には消費税率の抜本的な引上げが必要になること、また、政府債務残高比率を457%に維持するだけにしても、現在の歳出構造が続くならば、長期的に30%の消費税率が必要なこと、さらに、世代別では高齢層ほど、世代内では所得階層の低いほど、生涯純税負担率が小さいことが明らかになった。, This paper primarily aims at explaining the structure and properties of the newly developed overlapping generation model with four types of households grouped by income levels based on the latest Japanese data. Along with detailed account of the model structure and data, the sensitivity analysis on the key parameters, which are not fully supported by empirical studies, are conducted. Regarding policy simulations, we examine the fiscal sustainability of Japan under the current levels of debt and fiscal policy. Key findings are as follows. First, the financial collapse defined as a convergence limit, appears in 2040 when the debt-GDP ratio reaches 457%, implying that a significant tax hike is required to sustain the economy. Second, 30% of the consumption tax rate is necessary to restrain levels of the debt-GDP ratio from exceeding 457%, if the current structure of government spending lasts in the long run. Third, the lifetime net tax burden rate varies among households. The rate tends to be higher as they are born later (younger), and as they are richer.
    Keywords: 少子高齢化, 財政再建, 消費税, シミュレーション分析, population aging, fiscal sustainability, consumption tax, simulation analysis
    JEL: H30 C68 H61 E62 B41
    Date: 2018–10
  10. By: Manuel Guerra; João Pereira; Miguel St. Aubyn
    Abstract: The negative effect of population aging on the economy can be mitigated by a behavioral effect of people as a reaction to a higher life expectancy. We analyze the optimal life-cycle of individuals that allocate time at the intensive margin between leisure, human capital accumulation, and labor supply while facing an age-dependent mortality. This allows to enhance effects of changes in life expectancy on labor supply and human capital accumulation and to uncover trade-offs between time allocations at different stages of the life-cycle. Our life-cycles are characterized by on the job training throughout all the working life with a possibility of a temporary exit from the labor market. We simulate the model numerically and nd that with a higher life expectancy, labor supply increases at the intensive margin and the individual invests more in human capital. We also nd a willingness to increase labor supply at the extensive margin.
    Keywords: Life-Cycle; Age-Dependent Mortality; Aging; Time Allocation
    JEL: J22 J24 H55
    Date: 2018–11
  11. By: Sherwin Lott (Department of Economics, University of Pennsylvania)
    Abstract: When testing a theory, we should ask not just whether its predictions match what we see in the data, but also about its “completeness†: how much of the predictable variation in the data does the theory capture? Deï¬ ning completeness is conceptually challenging, but we show how methods based on machine learning can provide tractable measures of completeness. We also identify a model domain—the human perception and generation of randomness—where measures of completeness can be feasibly analyzed; from these measures we discover there is signiï¬ cant structure in the problem that existing theories have yet to capture.
    Keywords: Perturbation methods, DSGE models, odd derivatives, computational macroeconomics
    Date: 2018–05–21

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