a structural vision of the absorption of european … · from [93.7% to 99.8%], and the dominat is...

Romanian Statistical Review - Supplement nr. 2 / 2019114

A STRUCTURAL VISION OF THE ABSORPTION OF EUROPEAN FUNDS,

WHICH CORRELATES THE MONTE CARLO SIMULATION METHOD WITH THE SOLVER

METHOD

Ec. Ligian Tudoroiu

University of CraiovaProfessor habil. Gheorghe Săvoiu, PhDUniversity of Piteşti

Assoc. professor Emil Burtescu PhDUniversity of Piteşti

Abstract The fi nancial absorption of European funds in Romania can be

analyzed using a scenario simulated Monte Carlo method correlated with the

Solver method. The present article provides an original solution in response

to a structural questioning of the absorption approach in a concrete economic

context of anticipating the absorption of European funds in Romania during

the second multiannual budget term of the European Union (2014-2020). The

introduction synthesizes the concepts and methods exploited practically with

the help of a set of software packages, applied in an original manner, while

the main section of the article emphasizes the creativity or the innovativeness

of the correlative and structural solution off ered. Some fi nal remarks describe

the advantages of the correlative application of the scenario simulated Monte

Carlo method with the Solver method in a structural manner, anticipating the

absorption of EU funds.

Key words: simulation, scenario, Monte Carlo method, Solver

method, fi nancial absorption. JEL codes: C53, C58, E42, H43, H54, O22.

1. Introduction As René Descartes emphatically said in his Discours de la Méthode, in a specifi c manner that refers to mathematical reasoning, “nearly all things that come within the sphere of human knowledge are joined and concatenated in the same way”. An immediate requirement derived from that tenet is to validate and preserve the order of deduction of information from other information, as a support of a scientifi c method. The unpredictable eff ectiveness of Cartesian

methodological thinking can generate much more through multimethodology

Revista Română de Statistică - Supliment nr. 2 / 2019 115

or the multilateralism of methods used simultaneously (Livio, 2017), even

in a complex process of prospective fi nancial absorption of European funds.

This paper presents an original structural view of the absorption of European

funds by Romania in its second budget term as a member of the European

Union (2014-2020), optimistically correlating the scenario simulation based

on the Monte Carlo method with the Solver method, and capitalizing several

solutions in keeping with the Microsoft Excel packages (the Data Analysis/

Random Number Generation software), appreciated for its promptness and

interface in fi nancial simulations and modelling (Benninga, 2008), along with

the Eviews software package, used to determine descriptive statistics, the

results of the draws and the distributional and structural diagrams (Săvoiu,

2011; 2013), together with the innovative Microsoft Excel – Solver software,

applied in an innovative manner (Burtescu, 2010).

2. From optimized scenario simulation, based on the Monte Carlo

method, to the Solver method

In the 2014-2020 multiannual budget term, the prospect

of Romania’s fi nancial absorption of European funds represents a

methodological, computational, concerning the accurate and appropriate

foreseeing, and also the promptness in identifying and assessing the risks

of decreased absorption rates in the context of the implementation of the

projects that were approved and fi nanced.

In the multimethodic situation, following the combination of

scenario methods and the simulation methods, the contour of the possible

scenarios resulted from the views of the project management experts

(PM), ultimately correlating, after the simulation, in a prospective manner

based on a detailed structural anticipation at the level of the absorption

per program. The scenarios the could be capitalized on were pessimistic,

constant and optimistic, and this article refers only to the optimistic ones

resulting from the combination of PM experts’ views. Practically, the

classical brainstorming method was renounced, which capitalizes on PM

experts only to discern creative ideas or to harmonize their views, and the

technique of Delphi or Donald Phillips was capitalized on (Săvoiu et al,

2017; Tudoroiu, Săvoiu, 2018), out of the broad spectrum of specialized

techniques (Haefele, 1962).

In order to be able to predict eff ectively the fi nal rate and the

absorbed allocated funds from those that could be accessed, the two key

variables of the calibration simulation were calculated, or the initial rates

of the fi nancial absorption of the allocated funds (Fai) and of the fi nal

absorption rates (Rafi), adapted to the new allocation conditions, which


were then rescenarized in keeping with the new views expressed, by

applying the Delphi technique (Botez, et al., 1989, Nicolae, Constantin,

Grădinaru, 1998). to a volunteer sample of 29 experts from 50 announced The fi nal data resulting from the Delphi technique, applied to the experts, were later taken over by the Monte Carlo simulation, being detailed for the optimistic scenario in table no. 1:

The probabilistic variables concerning the funds allocated (Fai) and the

fi nal absorption rates (Rafi), in the opinion expressed by PM experts

Table no. 1Variable (Fai) where

i=3 (billion€)

Resulting

probabilities

Variable (Rafi), where

i=5 (in coeffi cients)

Resulting

probabilities21.50 0.20 0.87 0.1022.40 0.50 0.90 0.1023.00 0.30 0.92 0.20

- - 0.95 0.30- - 0.98 0.30

Source: The data available online at http://www.fonduri-ue.ro/images/fi les/implementare-absorbtie/Anexa_1-Stadiul_ absorbtiei_2007_-_2013_martie_2017.pdf were reminded to PM experts, and their fi nal opinions are centralized and synthesized by authors.

As soon as the Monte Carlo method was ready for scenarizing and calibration, it was applied to a number of 10,000 draws, then to another of 20,000, and based on the fl uctuations between the values of maximum probability of €21.28 billion and €21.95 billion, and fi nally 30,000 draws were used, by means of the Microsoft Excel and the Data Analysis/Random Number Generation software packages. Finally, the application of the Monte Carlo method and the optimistic scenarization led to a prospective dominant value of the funds absorbed of €21.28 billion, which ultimately had the maximum probability of occurrence at the point values or a broader expected range described by [21.16 - 22.54] € billion, with a probability of 0.54. The optimistic scenarization leads to absorption rates ranging from [93.7% to 99.8%], and the dominat is a rate of fi nancial absorption of European funds to Romania of 94.6% (as maximum probability of occurrence

as a punctual value).

All these aspects are visible in the chart we fi nally made (in Figure no. 1), based on the Data Analysis/Random Number Generation software; the image resulted from a screen capture in running the Microsoft Excel program package:


Screen capture of optimized scenario simulation using the Monte Carlo

method with the Data Analysis/Random Number Generation software

Figure no. 1

��D.�� - � �� $!� �

��

��

��

��

Source: Data processed by the authors using the Microsoft Excel program package

For the descriptive statistical analysis of the Monte Carlo simulation

results, the EViews program package was also used, which is more appropriate

in this case to produce descriptive statistics on optimized scenario simulation

results and the normality of Kernel density distributions of the fi nal statistical

data series – as can be seen in Figure no. 2:

Distribution of the data series for the European funds that could be

absorbed in 2014-2020, optimistically scenarized and simulated by the

Monte Carlo method

Figure no. 2

European Absorbed Funds xi

Frequencyni

18,71 64819,35 62019,49 154019,78 123620,01 90820,16 145620,43 172520,61 297120,70 92021,07 181421,16 174821,28 446621,85 272621,95 445822,54 2764Total 30000

Source: The data of the Monte Carlo simulation were processed by the authors with the Eviews

software package


The clarity, relevance and accuracy of the results of simulation using

the optimistically scenarized Monte-Carlo method are naturally infl uenced by

the structural composition by operational programmes, and it gets as low as the

project level, i.e. a greater complexity of the system of fi nancial absorption of European funds allocated generates a higher error, having eff ects similar to the

imprecision of the inaccuracy of the absorption probabilities deduced according

to the experts’ opinions…

The simulation of the phenomenon of fi nancial absorption of European funds by Romania, through the Monte Carlo method, in the situation of optimistic scenarizing generated by the opinions of PM experts (Săvoiu,

2006), fi nally also requires a correlation with the Solver method, in a creative or innovative manner, basically starting from the reality that there are various risks of decreasing the rate or correction in relation to the views of a number of experts (see the example of the Brexit risk, or of the diff erently geared

evolutions, which seem quite obvious in relation to overall prospects).

The Solver method, applied in a creative or innovative manner, is

exemplifi ed in a general model, focused on total European absorption funds and the limitations or constraints of the rate of this absorption (both variables being expressed in thousands of euros in fi nancial terms, and by absorption limits in promilles - 0/00 -), is displayed in two successive fi gures (Figure no. 3, at the level of an operational program or PO, and Figure no. 4, at the aggregate or totalizing level, in terms of accessed and absorbed funds, according to the two natural iterations: A. For any of the operational programs (POs), structured at project level:

Fictitious distribution of European projects reunited in an operational

program (PO), which are absorbed, scenarized optimistically and

simulated by the Solver method (fi rst iteration)

Figure no. 3.

Source: The data used by means of the Solver method are fi ctitious, and were processed by authors with the Microsoft Excel – Solver program package, modifi ed creatively or innovatively


B. At the aggregate level, quantifying the total absorbed funds detailed by

OP, with the clear possibility of anticipating developments in the second iteration

at program level, aggregated from projects, risks of failure, failed absorption,

other factors that induce decreases or increases rate of absorption, etc.

The fi ctitious distribution of the aggregate called European funds

absorbed by merging the operational programs (PO-1 … PO-6) that are

accessed and absorbed, optimistically scenarized, and simulated by the

Solver method (second iteration)

Figure no. 4

Source: The data used by means of the Solver method are fi ctitious, and were processed by

authors with the Microsoft Excel – Solver program package, modifi ed creatively or innovatively

Applying concretely the correlation with the Solver method to the

solutions of the simulation scenarized optimistically using the Monte-Carlo

method, three absorption variants are obtained, detailed at the level of:

i) six operational programmes (abbreviated by established acronyms)

in Figure no. 5


The distribution of the European funds absorbed by the merging

of six accessed and absorbed operational programmes, scenarized

optimistically, and simulated by measn of the Solver method (after the

second iteration)

Figure no. 5



ii) seven operational programmes (abbreviated by established

acronyms) in Figure no. 6

The distribution of the European funds absorbed by the merging of seven

accessed and absorbed operational programmes, scenarized optimistically,

and simulated by the Solver method (after the second iteration)

Figure no. 6



iii) eight operational programmes (abbreviated by established

acronyms) in Figure no. 7


The distribution of the European funds absorbed by bringing together eight

accessed and absorbed operational programmes, scenarized optimistically,

and simulated by the Solver method (after the second iteration)

Figure no. 7



Conclusions

The scenarized simulation by means of Monte Carlo method

correlated with the Solver method, modifi ed creatively or innovatively, brings

some favorable aspects, or application benefi ts, especially the promptness of

incorporating, into the foresight of fi nancial absorption, some emerging risks

that were not fully anticipated at the beginning, which virtually transform any

predictions in assessments of the future limited or aff ected by new constraints.

In addition to this major issue, the following benefi ts are obvious when

correlating the Monte Carlo scenario simulation method with the Solver method,

as a retrospective or post-calculus solution, as well as an effi cient prospective solution: a) it leads to a much faster and scenarized reassessment of data and risks; b) it lowers the level of anticipation down to that of the project with European funding accessed and absorbed (partially or totally in relation to their eff ective

absorption rate), and continues this operation at the level of the operational

programme; c) it promptly re-ranks risks, threats, limitations, restrictions, etc.

of the phenomenon of fi nancial absorption; d) it ensures immediate taking over

of changes in experts’ opinions on projects and operational programmes; e) it

provides immediate, or at least prompt solutions or relevant anticipations in the

case of funds blocking at the detailed project level, operational programme, and

subsequently, at aggregate or total level, concerning the fi nancial absorption of

European funds; f) it can also integrate structural elements, as well as linear

or nonlinear structural models, by capitalizing the Microsoft Excel – Solver

method with a high degree of coverage; g) it allows a broader integration of

opinions and scenarios at an aggregative and operational programme level; h)

the aggregate of total absorption, the total absorption rate is transformed by

correlating methods into an effi cient and realistic national retrospective and


prospective working tool, and, in terms of anticipatory possibilities, it has a

decision-making impact related to truly signifi cant project management.

An example of the application presented in the paper gives – like the

correlational application of two methods simultaneously Monte Carlo – Solver

– originality and creativity, structurally and scenario-wise, pragmatically and

in a maximizing manner in respect to the level of absorption of European funds

by Romania during the 2014-2020 period, i.e. the second multiannual budget

term, in an aggregated and detailed manner, and also afterwards, even under

such circumstances as developing at diff erent speeds or rates (Câmpeanu,

2017) and stratifi ed convergence within the EU.

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