Browsing by Author "Emirmahmutoglu, Furkan"

Now showing 1 - 4 of 4

Citation - WoS: 11
Citation - Scopus: 9
PPP hypothesis and temporary structural breaks
(Economics Bulletin, 2017) Corakci, Aysegul; Omay, Tolga; Emirmahmutoglu, Furkan; Tolga, Omay; 103299; Çankaya Meslek Yüksekokulu
In this study our aim is to explore a better testing strategy for the PPP hypothesis under a temporary structural break. For this purpose we use the exponential smooth transition (EST) function in the unit root testing framework and compare this methodology with the one that uses a Fourier function. Although the Fourier function is extensively used in the literature to test the validity of the PPP hypothesis under temporary breaks, this investigation shows that it leads to misleading results.
Citation - WoS: 21
Citation - Scopus: 20
Re-examining the real interest rate parity hypothesis (RIPH) using panel unit root tests with asymmetry and cross-section dependence
(Springer, 2017) Corakei, Aysegul; Omay, Tolga; Emirmahmutoglu, Furkan; Omay, Tolga; 103299; Çankaya Meslek Yüksekokulu
This paper investigates the validity of the real interest rate parity hypothesis (RIPH) using a panel unit root approach. For this purpose, first we estimate the possible nonlinear data-generating processes of the real interest rate differential series and using these estimates determine which panel unit root test is better for analyzing the RIPH. To this end, smooth transition autoregressive and threshold autoregressive (TAR) models are estimated for two different panels of countries: G7 and post-Soviet transition economies. The results show that the data displays both strong asymmetry and high transition speed. Therefore, secondly, we propose a new panel unit root test where the alternative is stationary with asymmetric TAR adjustment, and provide their empirical power properties. Finally, we demonstrate that our newly proposed test is able to provide conclusive evidence in favor of the RIPH in contrast to the other panel unit root tests considered.
Citation - WoS: 25
Citation - Scopus: 22
Real interest rates: nonlinearity and structural breaks
(Physica-verlag Gmbh & Co, 2017) Omay, Tolga; Omay, Tolga; Corakci, Aysegul; Emirmahmutoglu, Furkan; 103299; Çankaya Meslek Yüksekokulu
Real interest rate is a crucial variable that determines the consumption, investment and saving behavior of individuals and thereby acts as a key policy tool that the central banks use to control the economy. Although many important theoretical models require the real interest rates to be stationary, the empirical evidence accumulated so far has not been able to provide conclusive evidence on the mean reverting dynamics of this variable. To resolve this puzzle we re-investigate the stochastic nature of the real interest rates by developing unit root tests for nonlinear heterogeneous panels where the alternative hypothesis allows for a smooth transition between deterministic linear trends around which stationary asymmetric adjustment may occur. When the newly developed panel unit root tests are applied to the real interest rates of the 17 OECD countries, we were able to uncover overwhelming empirical support in favor of mean reversion in the short-run and long-run real interest rates. Therefore, these results show that the conclusions drawn from a miss-specified test that ignores the presence of either nonlinearity, structural breaks or cross sectional dependence can give quite misleading results about the stochastic behavior of the real interest rates.
Citation - WoS: 51
Citation - Scopus: 55
Reexamining the PPP hypothesis: A nonlinear asymmetric heterogeneous panel unit root test
(Elsevier, 2014) Emirmahmutoglu, Furkan; Omay, Tolga; Omay, Tolga; 43754; Çankaya Meslek Yüksekokulu
In this study, we re-examine the PPP hypothesis in the light of the new developments in the unit root testing literature. The recent theoretical findings have pointed out that the real exchange rate series exhibit asymmetric nonlinear behavior. A unit root test applied to analyze the PPP hypothesis therefore, should also take into account this asymmetry inherent in the real exchange rate. Different unit root tests that consider the presence of these data features have been developed in the time series literature. However, a true attempt to test the PPP hypothesis should take a panel data approach. To this end, we propose a nonlinear heterogeneous panel unit root test where the alternative hypothesis allows for symmetric or asymmetric exponential smooth transition autoregressive nonlinearity and provide its finite sample properties. We apply our test to the real exchange rates of the 15 European Union countries against the US dollar. While the results of the linear and symmetric nonlinear heterogeneous panel unit root tests are against the PPP hypothesis, the asymmetric nonlinear heterogeneous panel test that we propose gives support for the PPP hypothesis as expected. Therefore, the conclusions drawn from the linear panel unit root tests or the nonlinear panel unit root tests that do not take asymmetry into account might be misleading. (C) 2014 Elsevier B.V. All rights reserved.