Browsing by Author "Omay, Tolga"

Now showing 1 - 4 of 4

Citation Count: 4
A NOTE ON THE EXAMINATION OF THE FISHER HYPOTHESIS BY USING PANEL CO-INTEGRATION TESTS WITH BREAK
(inst Economic Forecasting, 2016) Omay, Tolga; Hasanov, Mubariz; Yuksel, Asli; Yuksel, Aydin
One problem encountered when examining the Fisher hypothesis is that various policy changes and economic shocks may induce structural shifts in the long-run relation. We explore the argument that panel cointegration tests based on common correlated effect estimators have reasonably good power and size properties, even in the presence of structural breaks, if the timing of structural shifts roughly coincide to each other across individual group members. Using the data from Omay et al.. (2015), which pays special attention to cross-section dependence issue but ignores the possibility of structural break in the data, we provide support to the argument above.
Citation Count: 29
Structural break, nonlinearity and asymmetry: a re-examination of PPP proposition
(Routledge Journals, Taylor & Francis Ltd, 2018) Omay, Tolga; Emirmahmutoglu, Furkan; Hasanov, Mubariz
In this study, we examine the validity of the PPP proposition for 28 European countries. For this purpose, we propose a new unit root test procedure that allows for both gradual structural breaks and asymmetric nonlinear adjustment towards the equilibrium level. Small-sample properties of the new tests are examined through Monte-Carlo simulations. The simulation results suggest that the new tests have satisfactory size and power properties. We then apply these new tests along with other unit root tests to examine stationarity properties of real exchange rate series of the sample countries. Our tests reject the null of unit root in more cases when compared to alternative tests. Overall, we find that the PPP proposition holds in majority of the European countries examined in this article.
Citation Count: 18
Testing for Unit Roots in Dynamic Panels with Smooth Breaks and Cross-Sectionally Dependent Errors
(Springer, 2018) Omay, Tolga; Hasanov, Mubariz; Shin, Yongcheol
We develop the extended unit root testing procedure for dynamic panels characterised by slowly moving trends (SMT) and cross-section dependence (CSD). We allow SMT to follow the smooth logistic transition function and the components error terms to contain the unobserved common factors. We propose the two panel unit root test statistics, one derived by the extended common correlated effects (CCE) estimator and the other based on the Sieve bootstrap. We have conducted extensive simulation exercises and document that the failure to take into account SMT and CSD may lead to misleading inference. On the other hand, we find that both bootstrap and CCE-based tests maintain good power properties in small samples in the presence SMT and CSD. We apply our proposed tests to real interest rates for 17 OECD countries and find overwhelming evidence in favour of the Fisher hypothesis.
Citation Count: 15
Testing PPP hypothesis under temporary structural breaks and asymmetric dynamic adjustments
(Routledge Journals, Taylor & Francis Ltd, 2020) Omay, Tolga; Shahbaz, Muhammed; Hasanov, Mubariz
We test the empirical validity of the PPP proposition under temporary structural breaks and dynamic nonlinear adjustments. Although several testing procedures have recently been proposed in the existing literature to investigate stochastic properties of the series under gradual breaks and nonlinear adjustments, none of these tests are compatible with the PPP proposition. Therefore, we propose new testing procedures that restrict the break to be temporary while simultaneously allowing for asymmetric dynamic nonlinear adjustment towards equilibrium. Using these newly proposed tests, we test stationarity of real exchange rate of 24 OECD countries vis-a-vis USA, and find support in favour of PPP proposition in majority of the countries.