General‐to‐Specific Model Selection Procedures for Structural Vector Autoregressions*

Structural vector autoregressive (SVAR) models have emerged as a dominant research strategy in empirical macroeconomics, but suffer from the large number of parameters employed and the resulting estimation uncertainty associated with their impulse responses. In this paper, we propose general‐to‐specific (Gets) model selection procedures to overcome these limitations. It is shown that single‐equation procedures are generally efficient for the reduction of recursive SVAR models. The small‐sample properties of the proposed reduction procedure (as implemented using PcGets) are evaluated in a realistic Monte Carlo experiment. The impulse responses generated by the selected SVAR are found to be more precise and accurate than those of the unrestricted VAR. The proposed reduction strategy is then applied to the US monetary system considered by Christiano, Eichenbaum and Evans (Review of Economics and Statistics, Vol. 78, pp. 16–34, 1996) . The results are consistent with the Monte Carlo and question the validity of the impulse responses generated by the full system.     

Can oil shocks explain asymmetries in the US Business Cycle?

We consider whether oil prices can account for business cycle asymmetries. We test for asymmetries based on the Markov switching autoregressive model popularized by Hamilton (1989), using the tests devised by Clements and Krolzig (2000). We find evidence against the conventional wisdom that recessions are more violent than expansions: while some part of the downturn in economic activity that characterises recessionary periods can be attributed to dramatic changes in the price of oil, post-War US economic growth is characterized by the steepness of expansions. First Version Received: December 2000/Final Version Received: September 2001     

A Markov–switching vector equilibrium correction model of the UK labour market

There is a wide literature on the dynamic adjustment of employment and its relationship with the business cycle. In this paper we present a statistical model that offers a congruent representation of part of the UK labour market since the mid 1960s. We use a cointegrated vector autoregressive Markov-switching model in which some parameters change according to the phase of the business cycle. Output, employment, labour supply and real earnings are found to have a common cyclical component. The long run dynamics are characterized by one cointegrating vector relating unemployment to trend-adjusted real wages and output. Despite there having been many changes affecting this sector of the UK economy, the Markov-switching vector-equilibrium-correction model with three regimes (representing recession, normal growth, and high growth) provides a good characterization of the sample data, and performs well relative to alternative linear and non-linear models. The results of an impulse-response analysis highlight the dangers of using VARs when the constancy of the estimated coefficients has not been established, and demonstrate the advantages of generating regime dependent responses. First Version Received: December 2000/Final Version Received: August 2001     

Airport alliances and mergers – Structural change in the airport industry?

Recent years have seen a global trend towards the emergence of multi-airport companies operating at a global scale. This paper employs industrial and transaction costs economics to identify the main drivers that shape the patterns of international cross-ownership structures that have emerged in the airport industry. In addition, implications for competition and competition policy are drawn.     

Alitalia – The failure of a national carrier

The paper examines the case of Alitalia, Italy’s former flag carrier, as a case of a state-managed failure. The history of the airline is characterized by a continuous decline in its competitive position since the progressive liberalization of the European aviation market. The root cause of this decline lies in the carrier being mainly used as a political tool rather than operating as a competitive firm. In a liberalized market this doomed Alitalia to failure, which was artificially delayed by numerous state financial and regulatory interventions. The paper starts with a historical overview of the most important events in recent Alitalia history. Thereafter the main causes of the airline’s weak competitive position relative to other European carriers are analyzed. We argue that the underlying causes of the decline were continuous political protection, lack of strategic views in favor of short-term objectives, and poor managerial decisions.     

An evaluation of yardstick regulation for European airports

The European airport industry is subject to various forms of economic regulation and there is debate as to which of the systems provides the best incentives for allocative and productive efficiency. This paper deals with the applicability of benchmarking as a regulatory tool for airports. This form of regulation aims at evaluating the cost level of a firm by comparing it to the mean marginal cost structure of all other firms in the market. The paper investigates the difficulties arising from airport benchmarking as well as the benefits that might be derived from it by drawing lessons from benchmark regulation in other industries and the few cases where it has been applied to airports. In particular, it assesses whether yardstick regulation is a feasible alternative to the existing forms of economic regulation or whether yardsticks are more useful for internal management purposes.     

Consistent Model Selection by an Automatic Gets Approach*

We establish the consistency of the selection procedures embodied in PcGets, and compare their performance with other model selection criteria in linear regressions. The significance levels embedded in the PcGets Liberal and Conservative algorithms coincide in very large samples with those implicit in the Hannan–Quinn (HQ) and Schwarz information criteria (SIC), respectively. Thus, both PcGets rules are consistent under the same conditions as HQ and SIC. However, PcGets has a rather different finite‐sample behaviour. Pre‐selecting to remove many of the candidate variables is confirmed as enhancing the performance of SIC.     

Futures market hedging efficiency in a new futures exchange: Effects of trade partner diversification

This paper uses transaction data to examine hedging efficiency in a new futures exchange; the Fish Pool salmon futures exchange in Norway. The paper utilizes data on firm-level exporter/importer transaction prices to quantify firm-level futures hedging efficiency. This allows us to address heterogeneity in hedging efficiency and basis risk at the firm level. The main result of this paper shows that larger firms with greater trade partner diversification have lower basis risk. Such firms align their internal transaction price closer to the common spot price in the market, which encourages greater futures market participation. Results are discussed in light of recent declines in participation in the salmon futures exchange.     

Job insecurity and intent to leave the nursing profession in Europe

To determine the occupational factors affecting nurses' decision to leave their profession before reaching retirement age, a large epidemiological study (Nurses' early exit study – NEXT)1 1. EU-financed project QLK6-CT-2001-00475. was carried out in ten European countries. Altogether 32,037 registered nurses answered a questionnaire, covering, for example, questions on job insecurity and intention to leave nursing work. The data were analysed statistically using Chi² test and binary logistic regression models.

Concern about becoming unemployed and difficulties to find a new job if laid off was reported by 40% of the respondents. More than half of the respondents were worried about their qualitative job security (being transferred to another job or changes in work schedule), while less than 40% had concerns about becoming unable to work. Thoughts about leaving the profession were reported by 15% of the respondents.

The hypothesis, that nurses will show higher intention to leave if they experience high levels of job insecurity, was partly supported by the results of the study. The concern about the qualitative aspects of job security correlated positively with intent to leave nursing in almost all the participating countries; most strongly among the Finnish and Norwegian nurses. The relationship between the concern about employment security and intent to leave varied from country to country, probably due to differences in the labour market situation. The correlation was positive for the Dutch and British nurses while, for the Polish and German sample, nurses who reported worry about their employment security appeared to be less willing to leave the profession than those who were not too worried. The concern about being unable to work correlated positively with intent to leave in several countries, reflecting the demands of the profession.

The effects of job insecurity can be reduced if nurses feel that they are important to the health care institution they work for, and that the institution cares about them, and values their opinion.