Simulation technology could help prevent future financial crises

Published: 30 November 2009 y., Monday

Skaičiuotuvas
How will economic policies adapt in 2020 when a quarter of the EU population is over 65? Can economics better predict how banks will react to credit crunches in the future, and what their impact will be on the wider economy? How will the economy work when dwindling natural resources make it harder to satisfy our energy needs? The European Commission today unveiled breakthrough research that could help economists answer questions like these by using economic simulation software. Produced by an EU-backed research project worth €2.5 million that came to a successful end today, the software applies simulation technology also used for computer generated images (CGI) in movies. It predicts the interaction between large populations of different economic actors, like households and companies, banks and borrowers or employers and job-seekers, who trade, and compete like real people. By giving each simulated agent individual and realistic behaviour and interactions that show how markets will evolve, these massive scale simulations can better test new policies tackling future societal challenges.

"This first class European research can help us make the move from the economics of pen and paper to the economics of super-computers," said Viviane Reding, EU Commissioner for Information Society and Media. " The results of this research project, will complement traditional economic statistics and assumptions about how economic actors react by enabling better testing of a policy's effects on people, while still on the drawing board. I expect government researchers and national research institutes will act quickly to put this tool at the disposal of decision- makers as soon as possible."

This simulation technology developed by EU-backed research uses computer-based experiments to focus on the relationship between large populations of different economic actors across many interconnected markets. It is the first time this technology is applied on such a big scale using high-powered computing. Each simulated household (or business, or bank) will make different decisions in reaction to various monetary, fiscal or pro-innovation policies including, for example, whether to remain in a job or seek a new one, how much of a wage is saved, spent or invested. This means that the impact of one policy in one market at one point in time is no longer assessed in isolation from other factors.

Traditional economics failed to predict the scale of the knock-on effect of the credit crunch on the world economy. The new software shows how banks react in different ways by looking at a wide range of factors like how much reserves they must keep compared to investments, their savers' consumption/investment and saving patterns, and psychological factors like confidence in the market. It can then give policymakers – who want to know how fiscal and monetary reforms will affect banks and customers – a better warning of the scale of a financial crisis' impact on the real economy. The software can also simulate the same scenario with an older demographic to help plan for an older Europe, or with limited energy supplies.

Designed to run on supercomputers that allow simulation to be carried out on a massive scale but accessible to any connected desktop PC, the software can be used by economists and policymakers with no knowledge of computer programming. By connecting hundreds of thousands of small simulated actions and reactions across the economy, the software can give policymakers better and bigger pictures of their policy impact on people's life and work.

The three-year project was carried out by economists and computer scientists from eight universities (in Italy, France, Germany, Turkey and the UK), brought together by the EU and financed from the European Commission's technology research budget.

 

Šaltinis: europa.eu
Copying, publishing, announcing any information from the News.lt portal without written permission of News.lt editorial office is prohibited.

Facebook Comments

New comment


Captcha

Associated articles

The most popular articles

Central Government Debt in January

According to the data presented by the Ministry of Finance, in end-January central government debt made up LTL26, 310.8 million or 28% of projected GDP for 2010 (LTL 93, 819 million). more »

China crisis getting worse

As far as countries affected by the economic crisis, China fared extremely well. more »

State aid: Commission authorises temporary Slovak scheme to grant limited amounts of aid of up to €15,000 to farmers

The European Commission has authorised today a Slovak scheme with a budget of approximately €3.32 million which aims at supporting farmers in Slovakia who encounter difficulties as a result of the current economic crisis. more »

Europe 2020: Commission proposes new economic strategy

Commission sets out a 10-year strategy for reviving the European economy, casting a vision of ‘smart, sustainable, inclusive' growth rooted in greater coordination of national and European policy. more »

Europe 2020: Commission proposes new economic strategy in Europe

The European Commission has launched today the Europe 2020 Strategy to go out of the crisis and prepare EU economy for the next decade. The Commission identifies three key drivers for growth, to be implemented through concrete actions at EU and national levels. more »

EU Aid Programme for Turkish Cypriot Community

Launching of the “SCHOOLS’ initiative for innovation and changes” Grant scheme. more »

Transaction tax and debt moratorium needed to meet development needs, say MEPs

EU Member States must not only deliver on their international aid pledges, but also bring in a financial transactions tax and a temporary debt moratorium, to help developing countries to cope with the effects of the global financial and economic crisis, said the Development Committee on Monday. more »

EBRD offers new funds to promote sustainable energy investments in Slovakia

The EBRD is increasing its commitments to promote sustainable energy projects in Slovakia with a new €90 million funding under the existing Slovakia Sustainable Energy Finance Facility (SLOVSEFF) to ensure continuous implementation of energy efficiency and small renewable energy projects. more »

During 2009 Bank SNORAS earned LTL 8.7 million profit

According to the unaudited data, in 2009 AB Bank SNORAS earned LTL 8.7 million profit. The bank’s assets grew by 11 per cent up to LTL 6.342 billion during 2009 and were by LTL 647.8 million larger than at the beginning of 2009. more »

Airport charges: security is Member States' responsibility, say MEPs

Aviation security measures that go beyond common EU requirements should be paid for by Member States, not by passengers, said Transport Committee MEPs in a vote on Monday that could put Parliament on a collision course with the Council of Ministers. more »