The power of dimensional analysis in production systems design

Dimensional Analysis (DA) is a well-known methodology in physics, chemistry and other traditional engineering areas. In its simplest form, DA is used to check the meaningfulness of a set of equations (dimensional homogeneity). In the last century, the dimensional theory has been profoundly investigated: its highest achievement is the Buckingham theorem (or pi-theorem), which states that any equation modelling a physical problem can be rearranged in terms of dimensionless ratios, thus saving variables to be handled, and especially enriching the inner physical knowledge of the studied phenomenon.In this paper we investigate how DA can be applied to Operations Management (OM) topics and which benefits it can bring to researchers in this area. A literature review is performed to clarify the main operative issues regarding DA application (assumptions and limitations); then existing applications of DA to OM are explored, pointing out that few researchers have tried to apply this methodology in the OM research field.Stemming from this analysis, we applied the pi-theorem to the design of a Flexible Manufacturing System. A complex problem, requiring 13 dimensional quantities to be expressed, is first studied via simulation; then DA is applied, reducing the number of variables to 9 dimensionless ratios. The reduced problem has a suitable size to be analytically explored and a regression model is formulated which, compared with the simulation study, offers the same precision in analysing the FMS behaviour, being more compact and powerful. This application shows the potential of DA in OM research, and will hopefully draw the attention of researches to this powerful, but unfamiliar and therefore neglected, methodology.     

Fitting dynamic factor models to non-stationary time series

Factor modelling of a large time series panel has widely proven useful to reduce its cross-sectional dimensionality. This is done by explaining common co-movements in the panel through the existence of a small number of common components, up to some idiosyncratic behaviour of each individual series. To capture serial correlation in the common components, a dynamic structure is used as in traditional (uni- or multivariate) time series analysis of second order structure, i.e. allowing for infinite-length filtering of the factors via dynamic loadings. In this paper, motivated from economic data observed over long time periods which show smooth transitions over time in their covariance structure, we allow the dynamic structure of the factor model to be non-stationary over time by proposing a deterministic time variation of its loadings. In this respect we generalize the existing recent work on static factor models with time-varying loadings as well as the classical, i.e. stationary, dynamic approximate factor model. Motivated from the stationary case, we estimate the common components of our dynamic factor model by the eigenvectors of a consistent estimator of the now time-varying spectral density matrix of the underlying data-generating process. This can be seen as a time-varying principal components approach in the frequency domain. We derive consistency of this estimator in a “double-asymptotic” framework of both cross-section and time dimension tending to infinity. The performance of the estimators is illustrated by a simulation study and an application to a macroeconomic data set.     

Nutrition and growth in Italy, 1861-1911: What macroeconomic data hide

We investigate how nutritional status responded to economic growth in Italy during 1861-1911. By combining household-level data on food consumption with population censuses, we estimate that the incidence of undernutrition decreased by at least 15% between 1881 and 1901. Income elasticity of calories in 1901 was in the range of 0.3-0.6, varying inversely with the level income. Overall, our findings do not support the pessimists’ view, ubiquitous in the Italian literature. On the contrary, the early phase of Italian industrialization was beneficial to the bulk of the population, and even more so for the poorest among the poor.     

Revisiting the European Monetary System Experience: Were Some Members More Equal than Others?

Difficulties in implementing effective liquidity support – to counter speculative attacks – may partly explain why regional exchange rate agreements crawl regional trade integration. Our novel analysis of the European Monetary System confirms that liquidity support was provided under the discretion of the anchor country (Germany), and was indeed asymmetric across member countries and/or periods. In particular, it was less forthcoming (i) to countries further away from Germany (less politically influential there), (ii) to larger countries (interfering more with the Bundesbank's monetary control) and (iii) during periods when German inflation accelerated (and the Bundesbank needed a firmer grip on liquidity).     

Monetary Union, institutions and financial market integration: Italy, 1862–1905

Years into the single currency, EMU financial markets are not fully integrated. We argue that the phenomenon can be better understood by looking at financial markets’ behavior in the wake of Italy’s monetary unification (1862). Variables such as the spread of the telegraph, trade volumes, and the diffusion of the ‘single currency’ fail to explain why it took 25 years for prices across regional stock exchanges to converge. A single Italian financial market appeared only when the State prevailed upon local vested interests by enforcing nation-wide financial market legislation.     

Competition among regulators and credit market integration

We analyze the incentives for independent bank regulators with financially integrated jurisdictions to form a regulatory union. Externalities lead competing regulators to choose suboptimally low standards. Centralized regulation, however, entails a loss of flexibility if equal standards must be applied across jurisdictions. We find that, first, centralized regulation will more likely emerge among relatively homogeneous jurisdictions/countries. Second, centralized regulation will be unanimously preferred to independence only if it entails standards higher than those of the country with the highest individual standards. Third, financial integration among more than two jurisdictions may prevent partial unions, which, in turn, may prevent more comprehensive agreements.     

A survey of cross-sectional and time-series literature on factors affecting child welfare

This paper reviews the literature on the socio-economic determinants of child welfare. Cross-sectional evidence is first analysed. The relevant literature is subdivided into four groups of studies depending on the main factors influencing child welfare: demographic; related to family circumstances; related to health care and sanitation; and economic. The very few time-series studies on this subject are then examined. While the existing literature does not allow definitive conclusions to be drawn on the predominance or relative importance of these four sets of factors, this paper identifies three related research areas for which particularly severe gaps seem to emerge and for which additional investigation appears necessary. These are: over-time studies, studies for low-income, high-mortality countries of Africa, for middle-income countries and for high-income, high-mortality countries, and studies measuring impact on the basis of indicators of welfare other than infant mortality rates.     

Turbulence underneath the big calm? The micro-evidence behind Italian productivity dynamics

Italy ranked last in terms of manufacturing productivity growth according to OECD estimates over the last decade, with a flat, if not declining, trend. In this work we investigate the underlying firm-level dynamics of enterprises on the basis of a database developed by the Italian Statistical Office (ISTAT) covering the period 1989?C2004 and containing information on more than 100,000 firms. Over this period not only have the indicators of the central tendency of the distribution of labor productivity not significantly changed, but also the whole sectoral distributions have remained relatively stable over time, with their support at least not shrinking, or even possibly widening, over time. This is even more surprising if one takes into consideration the ??Euro?? shock that occurred during the period investigated. On the contrary, we observe that inter-decile differences in productivity have been increasing. Further, heterogeneous firms?? characteristics (i.e. export activity and innovation) seem to have contributed to boosting such intra-industry differences. Given such wide heterogeneities we resort to quantile regressions to identify the impact of a set of regressors at different levels of the conditional distribution of labor productivity. One phenomenon that we observe is what we call a tendency toward ??neo-dualism?? involving the co-existence of a small group of dynamic firms with a bigger ensemble of much less technologically progressive ones.     

A general theory of controllability and expectations anchoring for small-open economies

Rational expectations are often used as an argument against policy activism, as they may undermine or neutralize the policymaker’s actions. Although this sometimes happens, rational expectations do not always imply policy invariance or ineffectiveness. In fact, in certain circumstances rational expectations can enhance our power to control an economy over time. In those cases, policy announcements can be used to extend the impact of conventional policy instruments. We present a general forward-looking policy framework and use it to provide a formal rationale for testing when policymakers can and cannot expect to be able to manage expectations. To describe the relevance of our results applications are shown for policy design in small-open economies. Those are the cases where domestic policies are at their weakest and our ability to influence expectations most constrained.