Browsing by Author "Omay, Tolga"

Now showing 1 - 20 of 36

Citation Count: Omay, Tolga; Çorakçı, Ayşegül (2023). "A Unit Root Test with Markov Switching Deterministic Components: A Special Emphasis on Nonlinear Optimization Algorithms", Computational Economics.
A Unit Root Test with Markov Switching Deterministic Components: A Special Emphasis on Nonlinear Optimization Algorithms
(2023) Omay, Tolga; Çorakçı, Ayşegül; 103299
In this study, we investigate the performance of different optimization algorithms in estimating the Markov switching (MS) deterministic components of the traditional ADF test. For this purpose, we consider Broyden, Fletcher, Goldfarb, and Shanno (BFGS), Berndt, Hall, Hall, Hausman (BHHH), Simplex, Genetic, and Expectation-Maximization (EM) algorithms. The simulation studies show that the Simplex method has significant advantages over the other commonly used hill-climbing methods and EM. It gives unbiased estimates of the MS deterministic components of the ADF unit root test and delivers good size and power properties. When Hamilton’s (Econometrica 57:357–384, 1989) MS model is re-evaluated in conjunction with the alternative algorithms, we furthermore show that Simplex converges to the global optima in stationary MS models with remarkably high precision and even when convergence criterion is raised, or initial values are altered. These advantages of the Simplex routine in MS models allow us to contribute to the current literature. First, we produce the exact critical values of the generalized ADF unit root test with MS breaks in trends. Second, we derive the asymptotic distribution of this test and provide its invariance feature. © 2023, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.
Citation Count: Omay, Tolga; Yuksel, Asli; Yuksel, Aydin, "An Empirical Examination Of The Generalized Fisher Effect Using Cross-Sectional Correlation Robust Tests For Panel Cointegration", Journal of International Financial Markets Institutions & Money, 35, pp. 18-29, (2015).
An Empirical Examination Of The Generalized Fisher Effect Using Cross-Sectional Correlation Robust Tests For Panel Cointegration
(Elsevier Science, 2015) Omay, Tolga; Yüksel, Aslı; Yüksel, Aydın; 19320
This study examines the generalized Fisher hypothesis as applied to common stocks by using the recently proposed second generation panel cointegration tests. Unlike their predecessors, these new tests assume the existence of cross-section dependence in the data. For the sample analyzed, we report that these new tests, but not their predecessors, provide strong support for the existence of cointegration between stock and goods prices. Moreover, further analysis cannot reject the hypothesis that the cointegration relation is linear. Finally, our Fisher coefficient estimates are in the range between 0.68 and 1.27 and give support to the generalized Fisher hypothesis. (C) 2014 Elsevier B.V. All rights reserved.
Citation Count: Karadağlı, Ece C.; Omay, T. (2006). "An Examination Of The Effects Of The February, 2001 Crisis (Turkey) On The Performances Of The Low-Q And High-Q Firms", International Business & Economics Research Journal, Vol.5, No.7, pp.41-44.
An Examination Of The Effects Of The February, 2001 Crisis (Turkey) On The Performances Of The Low-Q And High-Q Firms
(2006) Karadağlı, Ece C.; Omay, Tolga
This paper examines the effects of the February 2001 Economic Crisis (Turkey) on the low-Q and high-Q firms. In the study, our sample is composed of the firms that are actively being traded on Istanbul Stock Exchange (ISE) during that time, and is divided into two sub-samples based on their Tobins' Q values. As firms with high Tobins' Q values are supposed to have lower debt levels we proposed them to be less affected by the crises: their debt repayment commitments are lower, although they are expected to be under the burden of higher interest rates. On the other hand, low-Q firms have incentives to overinvest due to the high levels of available free cash and they may be under the burden of some perquisites expenses. But because of the asset substitution affect, the investments undertaken by low-Q firms are expected to be safer projects while high-Q firms may have undertaken more risky projects. To test our hypothesis that the crisis would affect the low-and high-Q firms to differing extends, we construct the average mean excess returns of both sub-samples and use the Large Sample Test of Hypothesis About a Population Mean method. Our results mainly confirm our expectations: we found that the average mean excess negative returns of high-Q firms were higher than that of low-Q firms during the February 2001 Crisis, indicating that high-Q firms are more riskier in an economic crisis setting than low-Q firms, which in turn implies that the effects of the conflict between equityholders and debtholders dominate the affects of the conflict between managers and the shareholders.
Citation Count: Hasanov, Mübariz; Omay, Tolga, "Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests", Vol. 7, No. 2, pp. 1-12, (2007).
Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests
(2007) Omay, Tolga; Hasanov, Mübariz; 19320
In this paper we address efficiency of eight transition stock markets, namely, Bulgarian, Chinese, Czech, Hungarian, Polish, Romanian, Russian and Slovakian stock markets by testing whether the price series of these markets contain unit root. For this purpose we employ the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) that has a better power than standard unit root tests when series under consideration are characterised by a slower speed of mean reversion. The results of nonlinear unit root tests indicate that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency.
Citation Count: Omay, Tolga, "Can Term Structure of Interest Rate Predict Inflation and Real Economic Activity: Nonlinear Evidence from Turkey?", Nonlinear and Complex Dynamics: Applications In Physical, Biological, and Financial Systems, pp. 269-294, (2012)
Can Term Structure of Interest Rate Predict Inflation and Real Economic Activity: Nonlinear Evidence From Turkey?
(Springer, 2011) Omay, Tolga; 19320
Citation Count: Omay, Tolga; Hasanov, Mübariz (2013). "Does the term structure of interest rate predict real economic activity? Nonlinear evidence from Turkey", Interest Rates: Term Structure Models, Monetary Policy, and Prediction, pp. 129-149.
Does the term structure of interest rate predict real economic activity? Nonlinear evidence from Turkey
(2013) Omay, Tolga; Hasanov, Mübariz
In this chapter we investigate whether the term structure of interest rates contains useful information about future real economic activity in Turkey for the period 1995:1 to 2003:3. The best model to describe the relationship between the term structure of interest rate and real economic activity in Turkey has been found to be Multiple Regime Smooth Transition Regression (MR-STR) model. Our results show that the relationship between the term structure of interest rates and the future economic activity is negative and significant in economic expansion and contraction periods, while it becomes positive and insignificant in moderate growth periods. In order to analyze these relationships, we employ correlation analysis by using nonparametric estimation technique. The results of correlation analysis are found to be consistent with the recursive Chow test and parameter stability tests. In addition, the correlation analysis indicates that the negative effects of the spread on real output can be explained by the interaction between the effects of the Expectation Hypothesis and Interest Transmission Channel.
Citation Count: Omay, Tolga; Apergis, Nicholas; Özçelebi, Hülya (2015). "ENERGY CONSUMPTION AND GROWTH: NEW EVIDENCE FROM A NON-LINEAR PANEL AND A SAMPLE OF DEVELOPING COUNTRIES", Singapore Economic Review, Vol. 60, No. 2.
ENERGY CONSUMPTION AND GROWTH: NEW EVIDENCE FROM A NON-LINEAR PANEL AND A SAMPLE OF DEVELOPING COUNTRIES
(2015) Omay, Tolga; Apergis, Nicholas; Özçelebi, Hülya
This paper investigates the relationship between economic growth and energy consumption through non-linear causality tests. Eight developing countries from Europe and Central Asia spanning the period 1993 to 2008 are selected for the purpose of panel empirical analysis. Panel unit root and panel cointegration tests with and without considering cross section dependency (CD) problems are implemented. Next, linear panel cointegration tests are employed and, finally, a two-regime Dynamic Panel Smooth Transition Vector Error Correction (PSTRVEC) model is estimated for testing the presence of non-linear short-and long-run causality. To this end, a new estimator, called the Dynamic Non-linear Pooled Common Correlated Effect Estimator (DNPCCEE) is proposed. The empirical findings indicate that short and long-run causalities are regime-dependent.
Citation Count: OMAY, T., (2008). Enflasyon ve büyüme belirsizliklerinin enflasyon ve büyüme ile olan ilişkileri: Türkiye örneği. Çankaya Üniversitesi Fen-Edebiyat Fakültesi Journal of Arts and Sciences, Sayı:10
Enflasyon ve büyüme belirsizliklerinin enflasyon ve büyüme ile olan ilişkileri: Türkiye örneği
(Çankaya Üniversitesi, 2008) Omay, Tolga; 19320
Çalışmada iki değişkenli Genelleştirilmiş Otoregresif Koşullu Değişen Varyans modeli yardımıyla büyüme, enflasyon oranı ve belirsizliklerinin arasındaki Granger nedensellik ilişkileri incelenmiştir. Türkiye ekonomisine uygulanan çalışma, 1986:6-2007:1 dönemini kapsamakta ve bu dönem 3 farklı alt döneme (1986:6-1994:3/1994:5-2001:1/2003:3-2007:1) ayrılarak analiz genişletilmektedir. Tam dönem ve alt dönemler itibari ile elde edilen sonuçlar doğrultusunda, merkez bankasının fiyat istikrarını korumasına yönelik politika duruşunun optimal olduğu sonucuna varılmıştır.
Citation Count: Omay, Tolga (2015). "Fractional Frequency Flexible Fourier Form to approximate smooth breaks in unit root testing", Economics Letters, Vol. 134, pp. 123-126.
Fractional Frequency Flexible Fourier Form to approximate smooth breaks in unit root testing
(2015) Omay, Tolga; 19320
In this study, a Fractional Frequency Flexible Fourier Form DF-type unit root test is proposed. The small sample properties of the proposed test are found to be better than that of the integer frequency counterpart. •Fractional Frequency Flexible Fourier Form-DF-type of unit root test is proposed.•The small sample properties of FFFFF-DF-type test are better than EL test.•FFFFF-DF-type test improves the empirical testing performance.•FFFFF-DF-type test prevents type two errors and over-filtration problems.
Citation Count: Omay, Tolga, "Fractional frequency flexible fourier form to approximate smoothbreaks in unit root testing" Economic Letters, Vol.134, pp.123-126 (2015).
Fractional frequency flexible fourier form to approximate smoothbreaks in unit root testing
(Elsevier Science SA, 2015) Omay, Tolga; 19320
In this study, a Fractional Frequency Flexible Fourier Form DF-type unit root test is proposed. The small sample properties of the proposed test are found to be better than that of the integer frequency counterpart.
Citation Count: Omay, Tolga; Baleanu, Dumitru (2021). "Fractional unit-root tests allowing for a fractional frequency flexible Fourier form trend: predictability of Covid-19", Advances in Difference Equations, Vol. 2021, No. 1.
Fractional unit-root tests allowing for a fractional frequency flexible Fourier form trend: predictability of Covid-19
(2021) Omay, Tolga; Baleanu, Dumitru; 56389
In this study we propose a fractional frequency flexible Fourier form fractionally integrated ADF unit-root test, which combines the fractional integration and nonlinear trend as a form of the Fourier function. We provide the asymptotics of the newly proposed test and investigate its small-sample properties. Moreover, we show the best estimators for both fractional frequency and fractional difference operator for our newly proposed test. Finally, an empirical study demonstrates that not considering the structural break and fractional integration simultaneously in the testing process may lead to misleading results about the stochastic behavior of the Covid-19 pandemic. © 2021, The Author(s).
Citation Count: Omay, Tolga; Çorakçı, Ayşegül; Hasdemir, Esra (2021). "High persistence and nonlinear behavior in financial variables: A more powerful unit root testing in the estar framework", Mathematics, Vol. 9, No. 20.
High persistence and nonlinear behavior in financial variables: A more powerful unit root testing in the estar framework
(2021) Omay, Tolga; Çorakçı, Ayşegül; Hasdemir, Esra; 103299
In this study, we consider the hybrid nonlinear features of the Exponential Smooth Transition Autoregressive-Fractional Fourier Function (ESTAR-FFF) form unit root test. As is well known, when developing a unit root test for the ESTAR model, linearization is performed by the Taylor approximation, and thereby the nuisance parameter problem is eliminated. Although this linearization process leads to a certain amount of information loss in the unit root testing equation, it also causes the resulting test to be more accessible and consistent. The method that we propose here contributes to the literature in three important ways. First, it reduces the information loss that arises due to the Taylor expansion. Second, the research to date has tended to misinterpret the Fourier function used with the Kapetanios, Shin and Snell (2003) (KSS) unit root test and considers it to capture multiple smooth transition structural breaks. The simulation studies that we carry out in this study clearly show that the Fourier function only restores the Taylor residuals of the ESTAR type function rather than accounting forthe smooth structural break. Third, the new nonlinear unit root test developed in this paper has very strong power in the highly persistent near unit root envi-ronment that the financial data exhibit. The application of the Kapetanios Shin Snell-Fractional Fourier (KSS-FF) test to ex-post real interest rates data of 11 OECD countries for country-specific sample periods shows that the new test catches nonlinear stationarity in many more countries than the KSS test itself. © 2021 by the authors. Licensee MDPI, Basel, Switzerland.
Citation Count: Çorakçı, A.; Omay, T.; Hasanov, M. (2022). "Hysteresis and stochastic convergence in Eurozone unemployment rates: evidence from panel unit roots with smooth breaks and asymmetric dynamics", Oeconomia Copernicana, Vol.13, No.1, pp.11-15.
Hysteresis and stochastic convergence in Eurozone unemployment rates: evidence from panel unit roots with smooth breaks and asymmetric dynamics
(2022) Çorakçı, Ayşegül; Omay, Tolga; Hasanov, Mubariz; 103299
Research background: Studying the dynamic characteristics of unemployment rate is crucial for both economic theory and macroeconomic policies. Despite numerous research, the empirical evidence about stochastic behaviour of the unemployment rate remains disputable. It has been widely agreed that most economic variables, including unemployment rates, are characterized by both structural breaks and nonlinearities. However, a little work is done to examine both features simultaneously. Purpose of the article: In this paper, we analyse the stationarity properties of unemployment rates of Euro area member countries. Also, we aim to test stochastic convergence of unemployment rates among member countries. Our empirical procedures explicitly allow for simultaneous gradual breaks and nonlinearities in the series. Methods: This paper develops a new unit root test procedure for panel data, allowing for both gradual structural breaks and asymmetric adjustment towards equilibrium. We carry out Monte Carlo simulations to examine small sample performance of the proposed test procedure and compare it to the existing test procedures. We apply the newly proposed test to examine the stochastic properties of the unemployment rates of Euro-member countries as well as relative unemployment rates vis-à-vis the Eurozone unemployment rate. Findings & value added: We find that the newly developed test procedure outperforms existing tests in highly nonlinear settings. Also, these tests reject the null hypothesis of unit root in more cases when compared to the existing tests. We find stationarity in the series only after allowing for structural breaks in the data generating process. Allowing for nonlinear and asymmetric adjustment in addition to gradual breaks provides evidence of stationarity in more cases. Furthermore, our results suggest that relative unemployment rate series are stationary, providing evidence in favour of stochastic convergence in unemployment rates. Overall, our results imply a limited room for coordinated economic policy to fight unemployment in the Eurozone.
Citation Count: Arın, K. Peren; Omay, Tolga (2006). "Inflation and growth: An empirical study for the comparison of the level and the variability effects", Trends in Inflation Research, pp. 207-213.
Inflation and growth: An empirical study for the comparison of the level and the variability effects
(2006) Arın, K. Peren; Omay, Tolga; 19320
This paper analyzes the interaction between the inflation and growth within the Mankiw-Romer-Weil (1992) framework. Our results indicate that the inflation level has a significant negative effect on output in advanced capitalist economies, whereas inflation variability has a negative and significant effect on output in the long-run for all sub-samples. Our results also show that the variability effects are larger in terms of significance. © 2006 Nova Science Publishers, Inc. All rights reserved.
Citation Count: Çorakçı, A.; Omay,T. (2023). "Is there convergence in renewable energy deployment? Evidence from a new panel unit root test with smooth and sharp structural breaks", Renewable Energy, Vol.205, pp. 648-662.
Is there convergence in renewable energy deployment? Evidence from a new panel unit root test with smooth and sharp structural breaks
(2023) Çorakçı, Ayşegül; Omay, Tolga; 103299
This study examines whether the contribution of renewable energy to the total primary energy supply converges in a panel of 24 OECD countries over the period 1960–2020. To this end, a new panel unit root test that allows for both sharp and smooth breaks is proposed to test for the stochastic convergence hypothesis. Although renewable energy convergence is not rejected when the newly proposed test is applied to the full panel of OECD countries, it found only moderate support within the members of the panel using a sequential panel selection methodology. In fact, in two high-income OECD countries, the contribution of renewable energy to the primary energy supply shows no sign of convergence: Poland and Iceland. Therefore, the renewable energy shares seem to be converging to a common steady state in only a group of OECD countries over the long run. This uneven pattern of convergence, in turn, suggests that the OECD countries are still far away from developing a common sustainable renewable energy target, calling for urgent international policy cooperation to encourage the divergent economies to seek out the menu of policies that ensure the worldwide success of renewable energy transformation.
Citation Count: Çorakçı, Ayşegül; Omay, Tolga (2023). "Is there convergence in renewable energy deployment? Evidence from a new panel unit root test with smooth and sharp structural breaks", Renewable Energy, Vol. 205, pp. 648-662.
Is there convergence in renewable energy deployment? Evidence from a new panel unit root test with smooth and sharp structural breaks
(2023) Çorakçı, Ayşegül; Omay, Tolga; 103299
This study examines whether the contribution of renewable energy to the total primary energy supply converges in a panel of 24 OECD countries over the period 1960–2020. To this end, a new panel unit root test that allows for both sharp and smooth breaks is proposed to test for the stochastic convergence hypothesis. Although renewable energy convergence is not rejected when the newly proposed test is applied to the full panel of OECD countries, it found only moderate support within the members of the panel using a sequential panel selection methodology. In fact, in two high-income OECD countries, the contribution of renewable energy to the primary energy supply shows no sign of convergence: Poland and Iceland. Therefore, the renewable energy shares seem to be converging to a common steady state in only a group of OECD countries over the long run. This uneven pattern of convergence, in turn, suggests that the OECD countries are still far away from developing a common sustainable renewable energy target, calling for urgent international policy cooperation to encourage the divergent economies to seek out the menu of policies that ensure the worldwide success of renewable energy transformation.
Citation Count: Hasanov, M., Omay, T. (2008). Monetary policy rules in practice: Re-examining the case of Turkey. Physica A-Statistical Mechanics And Its Applications, 387(16-17), 4309-4318. http://dx.doi.org/10.1016/j.physa.2008.02.075
Monetary policy rules in practice: Re-examining the case of Turkey
(Elsevier Science, 2008) Hasanov, Mübariz; Omay, Tolga
This paper investigates possible asymmetries in the monetary policy reaction function of the Central Bank of Republic of Turkey over the business cycles. It is found that the bank reacted more aggressively towards output stabilisation during recessions than expansions. The empirical evidence suggests that the inflation targeting policy of the Turkish Central Bank was accommodative rather than stabilising. Furthermore, it is found that although the Central Bank of Republic of Turkey responded to foreign reserves, real exchange rates and short-term capital inflows both in expansion and recession periods, the bank targeted money growth, budget deficits, and net foreign assets only in expansion periods
Citation Count: Hasanov, M., Omay, T. (2008). Nonlinearities in emerging stock markets: evidence from Europe's two largest emerging markets. Applied Economics, 40(20), 2645-2658. http://dx.doi.org/10.1080/00036840600970310
Nonlinearities in emerging stock markets: evidence from Europe's two largest emerging markets
(Routledge Taylor&Francis Group, 2008) Omay, Tolga; Hasanov, Mübariz
Recent developments in time series analysis allow proper modelling of nonlinearities in economic and financial variables. A growing body of research was dedicated to investigation of potential nonlinearities in conditional mean of many economic and financial variables, mainly concentrating in developed economies. However, nonlinearities in financial variables in developing economies have not been fully examined yet. In this article we investigate potential nonlinearity and cyclical behaviour of stock returns in Europe's two largest emerging stock markets, mainly in the Greek and Turkish stock markets. Specifically, we use STAR family models, which allow to model nonlinearities in the conditional mean, for modelling monthly returns on stock exchange indices of the Athens Stock Exchange and Istanbul Stock Exchange. Although we find no nonlinearity in conditional variance, we do find strong evidence in favour of nonlinear adjustment of stock returns. It is found that allowing for nonlinearity in conditional mean results in a superior model and provides good out-of-sample forecasts, which contradicts to efficient market hypothesis
Citation Count: Nigmatullin, R.R., Omay, T., Baleanu, D. (2009). On fractional filtering versus conventional filtering in economics. Communications In Nonlinear Science And Numerical Simulation, 15(4), 979-986. http://dx.doi.org/10.1016/j.cnsns.2009.05.027
On fractional filtering versus conventional filtering in economics
(Elsevier Science, 2010) Nigmatullin, Raoul R.; Omay, Tolga; Baleanu, Dumitru
In this study, we compare the Hodrick-Prescott Filter technique with the Fractional filtering technique that has recently started to be used in various applied sciences like physics, engineering, and biology. We apply these filtering techniques to quarterly GDP data from Turkey for the period 1988:1-2003:2. The filtered series are analyzed using Minimum Square Error (MSE) and real life evidence. In the second part of the study, we use simulated data to analyze the statistical properties of the aforementioned filtering techniques
Citation Count: Corakci, Aysegul; Emirmahmutoglu, Furkan; Tolga, Omay, "PPP hypothesis and temporary structural breaks", Economics Bulletin, Vol.37, No.3, pp.1541-1548, (2017).
PPP hypothesis and temporary structural breaks
(Economics Bulletin, 2017) Çorakçı, Ayşegül; Emirmahmutoğlu, Furkan; Omay, Tolga; 103299
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.