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Permanent URI for this collectionhttps://hdl.handle.net/20.500.14411/18
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Article Nonlinearity and Structural Breaks in Oil Prices: Policy Implications and Macroeconomic Interactions(Walter de Gruyter GmbH, 2026-03-09) Omay, Tolga; Sungur, Nazli CeylanThis study examines Brent crude oil price dynamics using an integrated framework of bootstrap sequential break detection and Asymmetric Exponential Smooth Transition Autoregressive (AESTAR) modeling. We demonstrate that oil prices follow an AESTAR process where structural breaks emerge endogenously through dual transition functions, reconciling previously competing explanations in the literature. Analysis of monthly data (1985-2023) identifies major structural shifts coinciding with critical economic events, while revealing these breaks emerge automatically through regime-dependent means. Enhanced testing confirms embedded LSTAR-dominant dynamics with ESTAR components, while skeleton analysis validates the dual equilibrium framework with balanced regime distribution. Generalized Impulse Response Function analysis reveals distinct shock transmission patterns: Tier 1 extreme events (delta max > 1.8) exhibit persistent deviations requiring sustained policy intervention, while Tier 2 events demonstrate mean reversion properties suitable for conventional responses. The framework provides observable threshold levels ($53.62, $37.39) enabling real-time policy intervention, supporting regime-contingent monetary policy and strategic petroleum reserve management protocols. This approach offers policymakers actionable tools for managing oil price volatility through empirically validated intervention strategies.Article Citation - WoS: 1Makroekonomik ve Sosyo-Politik Endeks Nitelikli Çalışan başına Reel GSYH’yi Nasıl Etkiler? Türk Cumhuriyetleri’nden Kanıtlar(Ahmet Yesevi Univ, 2023-04-27) Kucuker, Mustafa Can; Omay, Tolga; Celik, Esref Ugur; Erdal, Fehmi BuğraBu çalışmada, nitelikli çalışan başına reel GSYH düzeyini etkileyen sosyoe- konomik faktörler üzerinde durulmuştur. Bu amaçla Türk Cumhuriyetleri için makroekonomik ve sosyo-politik performans endeksleri oluşturulmuştur. Yeni oluşturulan bu endeksler kullanılarak, nitelikli çalışan başına düşen reel GSYH düzeyinin belirleyicileri literatürde ilk kez analiz edilmektedir. Ampi- rik sonuçlar, belirli eşik düzeylerinin nitelikli çalışan başına reel GSYH düze- yini önemli ölçüde etkilediğini göstermektedir. Sonuç olarak, çalışmada yer verilen ülkelerin politika yapıcıları, ülkelerinin refahı açısından iyi organize edilmiş politikalar yürütmek için makroekonomik ve sosyo-politik perfor- mans endekslerin eşik değerlerini ciddi şekilde göz önünde bulundurmalıdır.Article A Flexible Methodological Approach for Deriving Asymptotic Distributions in Nonlinear Unit Root Tests(Springer, 2026-02-28) Omay, TolgaThis paper examines the challenges associated with deriving asymptotic distributions for nonlinear unit root tests. Although the prevalence of non-linear models has increased in recent years, such complex functions make deriving analytical solutions for ergodicity conditions and asymptotic distributions more challenging. The common practice of approximating nonlinear unit root tests with linear functions results in a significant loss of information. This study proposes a novel approach that utilizes the augmented Fourier transformation of the Arctan function to overcome these limitations. The fast convergence properties of the Arctan function within the Fourier framework allow for the derivation of asymptotic distributions for nonlinear unit root tests. The effectiveness of this method is demonstrated by obtaining previously elusive asymptotic distributions for the (existing nonlinear unit root tests) Leybourne et al., in Journal of Time Series Analysis, 19(1), 83-97 (1998) test and achieving improved approximations for the Kapetanios et al., in Journal of Econometrics, 112(2), 359-379 (2003) test. Furthermore, we develop a new unrestricted ESTAR unit root test and demonstrate how previously unattainable asymptotic distributions can be readily derived for this novel test. An empirical application to real exchange rates, incorporating this new test alongside the existing KSS and Kılıç inft tests, reveals that our unrestricted version captures the data generating process more effectively than its restricted counterparts and demonstrates the superior performance of high-power tests that would otherwise be analytically intractable. Therefore, this approach offers a more accurate and robust way to understand the behavior of non-linear unit root tests.Article Real Interest Rate Parity in Latin American Countries: Evidence from New Panel Unit Root Tests(Wiley, 2026-02-21) Omay, Tolga; Abioglu, Vasif; Hasanli, MubarizIn this study, we test the empirical validity of the real interest rate parity hypothesis for 15 Latin American countries over the period 2005-2023. To this end, we employ a battery of panel unit root tests to examine stochastic properties of the real interest rate differentials (RIDs) of the countries under consideration. The panel unit root tests that allow for both the cross-sectional dependence and the nonlinearities in the adjustment process do not reject the null of unit root for the most of these countries, suggesting that the real interest rate parity hypothesis does not hold for these countries. On the other hand, the panel unit root test that allows for smooth structural changes produces results consistent with the real interest rate parity hypothesis for 12 out of 15 Latin American countries. These findings imply that various shocks, including political, economic, and financial upheavals, can cause significant structural shifts in the RIDs of Latin American countries.Article A Computationally Efficient Approximation for Fractional Differencing: First-Order Operators(Pergamon-Elsevier Science Ltd, 2026-04) Omay, Tolga; Baleanu, DumitruThis paper introduces the First-Order Fractional Differencing (FOFD) operator that substantially reduces the computational burden of fractional differencing for large-scale applications. While the standard Gr & uuml;nwald-Letnikov (GL) operator requires O(T2) operations for a series of length T, and recent FFT-based methods achieve O(T log T), our FOFD operator requires only O(T) operations through a simple two-point recursion. We develop an optimal weight calibration framework that ensures this computational efficiency does not compromise statistical accuracy, deriving a general formula wopt = d & sdot; (1-0.9 rho)beta(p) that adapts to the persistence structure of autoregressive processes. Empirical applications demonstrate substantial improvements: for the Chicago Fed National Financial Conditions Index with extreme persistence (rho= 0.992), optimal weight calibration reduces approximation error by 93% while preserving the autocorrelation structure of the GL operator. For a series of 10,000 observations, our method requires 20,000 operations compared to 530,000 for FFT-based methods and 50 million for standard implementations-enabling fractional differencing in real-time and high-frequency contexts previously infeasible due to computational constraints. The method's simplicity, requiring no specialized libraries and providing direct implementation through our calibration formula, makes it immediately accessible to practitioners while maintaining the long-memory properties essential for financial time series modeling.Article Citation - Scopus: 1Dynamic Market Efficiency Assessment in Sustainability Indices: Rolling Fractional Integration Analysis with Multiple Estimators(Elsevier, 2025-11) Gonul, Ibrahim Omer; Omay, TolgaThis study develops a comprehensive econometric framework for assessing market efficiency in sustainability indices through rolling fractional integration analysis. We employ four fractional integration estimators (Andrews-Guggenberger, Robinson GSE, GPH, and FELW) with formal statistical testing, addressing critical methodological gaps including single estimator dependency and static analysis approaches. Applied to 17 sustainability indices across 13 countries, our results reveal significant heterogeneity in market efficiency evolution. Developed markets exhibit timevarying efficiency patterns with periodic inefficiencies driven by institutional rebalancing dynamics, while emerging markets demonstrate superior efficiency characteristics. The BIST Sustainability Index exhibits exceptional efficiency, while the SP 500 ESG Screened Index shows the highest inefficiency levels among developed markets. The convergent validity between fractional integration and traditional unit root tests provides robust methodological validation. Our findings establish unprecedented robustness in sustainability market efficiency research while providing policy implications for financial regulators and investment managers.Article Citation - WoS: 1Citation - Scopus: 3The Refinement of a Common Correlated Effect Estimator in Panel Unit Root Testing: an Extensive Simulation Study(Mdpi, 2024-11-05) Omay, Tolga; Akdi, Yilmaz; Emirmahmutoglu, Furkan; Eryilmaz, MeltemThe Common Correlated Effect (CCE) estimator is widely used in panel data models to address cross-sectional dependence, particularly in nonstationary panels. However, existing estimators have limitations, especially in small-sample settings. This study refines the CCE estimator by introducing new proxy variables and testing them through a comprehensive set of simulations. The proposed method is simple yet effective, aiming to improve the handling of cross-sectional dependence. Simulation results show that the refined estimator eliminates cross-sectional dependence more effectively than the original CCE, with improved power properties under both weak- and strong-dependence scenarios. The refined estimator performs particularly well in small sample sizes. These findings offer a more robust framework for panel unit root testing, enhancing the reliability of CCE estimators and contributing to further developments in addressing cross-sectional dependence in panel data models.Article Citation - WoS: 6Citation - Scopus: 6Historical Environmental Kuznets Curve for the Usa and the Uk: Cyclical Environmental Kuznets Curve Evidence(Springer, 2024-09-17) Omay, Tolga; Yildirim, Julide; Balta-Ozkan, NazmiyeHuman activities, including population growth, industrialization, and urbanization, have increasingly impacted the environment. Despite the benefits of economic growth to individual welfare, its negative environmental consequences necessitate a thorough assessment. The environmental Kuznets curve (EKC), positing an inverted U-shaped relationship between income per capita and environmental degradation, has been extensively studied since its proposition by Grossman and Krueger (Environmental impacts of a North American free trade agreement, National Bureau of Economic Research working paper, 1991. https://doi.org/10.3386/w3914). However, empirical evidence on the validity and shape of the EKC varies due to methodological differences, country-specific dynamics, and other factors. Examining the historical growth paths of individual countries helps explain the mixed findings in empirical EKC research. Long-term data allow researchers to determine the EKC's shape and turning points, aiding policymakers in devising appropriate environmental policies for each economic growth cycle within the framework of global environmental governance. Accordingly, this study contributes to the literature by taking a historical perspective on the EKC, focusing specifically on the United States and the United Kingdom. Drawing on data spanning from 1850, we employ advanced econometric techniques, including fractional frequency flexible Fourier form Dickey-Fuller-type unit root tests and structural breaks unit root tests, to overcome limitations of traditional linearized EKC estimations. Moreover, the classical polynomial regression approach is employed to model the long-term cycles based on the scatterplot inspection of per capita carbon dioxide (CO2) and per capita GNP series. Contrary to conventional expectations, our empirical findings do not support the existence of a clear inverted U-shaped EKC relationship between CO2 emissions and economic growth for either country. Instead, our analysis reveals the presence of multiple regimes, indicating a cyclical pattern where economic growth affects environmental quality with varying severity over time. Furthermore, we demonstrate proper modeling techniques for the EKC, highlighting the importance of identification and misspecification tests. Our study identifies cyclical EKC patterns for both the UK and the USA, with the UK exhibiting two cycles and the USA exhibiting three, shaped by varying economic, social, and technological contexts. By revealing the nuances of the economic growth-environmental degradation nexus for these early developer countries, our study provides valuable insights for policymakers seeking to devise evidence-based and environmentally sustainable growth policies within the framework of global environmental governance. These findings underscore the importance of considering historical context and structural changes when analyzing the EKC, providing valuable insights for policymakers aiming to design adaptive and sustainable economic growth strategies.Article Citation - WoS: 3Citation - Scopus: 5Comparison of the Performance of Structural Break Tests in Stationary and Nonstationary Series: a New Bootstrap Algorithm(Springer, 2024-07-08) Camalan, Ozge; Hasdemir, Esra; Omay, Tolga; Kucuker, Mustafa CanStructural breaks are considered as permanent changes in the series mainly because of shocks, policy changes, and global crises. Hence, making estimations by ignoring the presence of structural breaks may cause the biased parameter value. In this context, it is vital to identify the presence of the structural breaks and the break dates in the series to prevent misleading results. Accordingly, the first aim of this study is to compare the performance of unit root with structural break tests allowing a single break and multiple structural breaks. For this purpose, firstly, a Monte Carlo simulation study has been conducted through using a generated homoscedastic and stationary series in different sample sizes to evaluate the performances of these tests. As a result of the simulation study, Zivot and Andrews (J Bus Econ Stat 20(1):25-44, 1992) are the best-performing tests in capturing a single break. The most powerful tests for the multiple break setting are those developed by Kapetanios (J Time Ser Anal 26(1):123-133, 2005) and Perron (Palgrave Handb Econom 1:278-352, 2006). A new Bootstrap algorithm has been proposed along with the study's primary aim. This newly proposed Bootstrap algorithm calculates the optimal number of statistically significant structural breaks under more general assumptions. Therefore, it guarantees finding an accurate number of optimal breaks in real-world data. In the empirical part, structural breaks in the real interest rate data of the US and Australia resulting from policy changes have been examined. The results concluded that the bootstrap sequential break test is the best-performing approach due to the general assumption made to cover real-world data.Article Citation - WoS: 21Citation - Scopus: 18Testing Ppp Hypothesis Under Temporary Structural Breaks and Asymmetric Dynamic Adjustments(Routledge Journals, Taylor & Francis Ltd, 2020-01-21) Omay, Tolga; Shahbaz, Muhammed; Hasanov, MubarizWe 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.