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Citation - WoS: 10
Citation - Scopus: 11
Is There Convergence in Renewable Energy Deployment? Evidence From a New Panel Unit Root Test With Smooth and Sharp Structural Breaks
(Pergamon-elsevier Science Ltd, 2023) Corakci, Aysegul; Omay, Tolga
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 econo-mies to seek out the menu of policies that ensure the worldwide success of renewable energy transformation.
Citation - WoS: 1
Citation - Scopus: 2
Controlling Heterogeneous Structure of Smooth Breaks in Panel Unit Root and Cointegration Testing
(Springer, 2023) Omay, Tolga; Iren, Perihan
This study aims to show the consequences of a restrictive homogeneity assumption of frequency in heterogeneous panel unit root and cointegration testing with Flexible Fourier Form. For this purpose, we use a simple panel unit root and residual based cointegration test with Flexible Fourier Form in a heterogeneous frequency setting using a bootstrap algorithm. The power of the test statistics and empirical analysis results indicate that failing to take into account a heterogeneous frequency may lead to misleading inferences, thereby leading to misspecified tests and erroneous conclusions concerning the stochastic behavior of the data in the panel sample.
Citation - WoS: 7
Citation - Scopus: 6
Oil and Stock Prices: New Evidence From a Time Varying Homogenous Panel Smooth Transitionvecmfor Seven Developing Countries
(Wiley, 2022) Ceylan, Resat; Ivrendi, Mehmet; Shahbaz, Muhammed; Omay, Tolga
This paper investigates the relationship between international oil price and stock prices applying the time varying causality testing over the period of 2000(M1)-2017(M3). The panel unit root and panel cointegration tests considering cross-section dependence are also employed. A time varying panel smooth transition vector error correction (TV-PSTRVEC) model is a developed and estimated for testing the presence of non-linear short-run and long-run causality, and cointegrating relationship between stock and oil prices. The empirical findings indicate that short and long-run causalities between oil price and stock prices are time-dependent. Moreover, oil price cause stock prices in the long-run. In the short-run, neutral effect exists between oil price and stock prices. These two findings are evidence of a strong exogeneity of oil price in time-dependent regimes which is also supporting the recent arguments and empirical findings.
Citation - WoS: 19
Citation - Scopus: 12
Using Double Frequency in Fourier Dickey-Fuller Unit Root Test
(Springer, 2022) Cai, Yifei; Omay, Tolga
We propose a double frequency fourier Dickey-Fuller (DF) unit root test. The asymptotic theory of the newly proposed test is first presented in this study. We conduct a series of simulations which suggest the proposed test statistic has correct size performance and gains more power when breaks are located at the beginning and end of the sample and in smooth type. In empirical analysis, we utilize the new test to examine the unit root hypothesis of relative commodity prices measured by Harvey et al. (Rev Econ Stat 92(2):367-377, 2010). The empirical results show that more relative commodity prices are stationary around a deterministic trend generated from double frequency Fourier function.
Citation - WoS: 6
Citation - Scopus: 8
Are CO₂ Emissions Stationary After All? New Evidence from Nonlinear Unit Root Tests
(Springer, 2022) Romero-Avila, Diego; Omay, Tolga
This study applies a large battery of state-of-the-art nonlinear unit root tests to examine the stationarity properties of carbon dioxide emission series for 28 industrialized countries, five BRICS and seven transition economies over a very long horizon, in some cases over more than two and a half centuries. The application of time-dependent and state-dependent nonlinear unit root tests separately provides mixed evidence regarding the time-series properties of CO2 emissions and a high degree of variability across the different tests. However, the use of hybrid nonlinear unit root tests, combining the presence of structural breaks with symmetric or asymmetric ESTAR adjustment, leads to the rejection of the unit root hypothesis in each of the countries under study with at least one of the hybrid tests. This has important climate policy implications.
Citation - WoS: 1
Citation - Scopus: 1
A Note on Co₂ Emissions Using Two New Tests
(Springer, 2023) Sephton, Peter; Omay, Tolga
Recent research suggests that policies implementing structural change are required to alter the paths of carbon dioxide emissions in many nations. This note provides additional support for this view, allowing for smooth shifts in the deterministic part of the stochastic process. A Fourier wavelet unit root test indicates that in many countries, a temporary shock to emissions will have a permanent impact, whereas tests that examine fractional integration around a smooth break with de-trending indicate that a shock to emissions will have a transitory impact. Policies that induce structural changes are required to place emissions on a downward path.
Citation - WoS: 19
Citation - Scopus: 17
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.
Citation - WoS: 4
Citation - Scopus: 4
Examining the non-linear stochastic behavior of the European energy market: evidence from nonlinear unit root tests
(Taylor & Francis inc, 2022) Aktan, Ceyda; Omay, Tolga; Sahin, Eyyup Ensari
Stock market efficiency has been one of the most investigated topics of the last century. Knowing the efficiency of a market has major implications for both investors and policymakers, as a perfectly efficient market eliminates any arbitrage opportunity and the possibility of actually beating the market. For this reason, this study aims to examine the weak-form market efficiency of the European energy markets using linear and nonlinear unit root tests for the period covering February 2012 to April 2021. The results indicated that while the Augmented Dickey-Fuller test captured the stationarity in only Austria's Oil, and Gas index, using nonlinear tests showed stationarity in 17 of the 20 indices tested. Overall, the European Energy Market can be considered inefficient under the weak form of the Efficient Market Hypothesis. Therefore, there is an indication of profitable arbitrage opportunities among energy stocks. Signs of stationarity also suggest that shocks to energy stocks will have temporary effects. Energy markets of Austria, Finland, France, Greece, Italy, Netherlands, Russia, Spain, Sweden, and the United Kingdom, for this reason, could benefit from policy changes to support increased information flow to achieve more transparency and utilize better trading technologies.
Citation - WoS: 20
Citation - Scopus: 20
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 - WoS: 9
Citation - Scopus: 9
Market Development and Market Efficiency: Evidence Based on Nonlinear Panel Unit Root Tests
(Routledge Journals, Taylor & Francis Ltd, 2019) Aktan, Ceyda; Iren, Perihan; Omay, Tolga
This study tests the weak form market efficiency of 32 European stock markets. Utilizing monthly data from June 2006 to June 2017, six different, newly developed nonlinear panel root tests were applied in three different groups of European markets: Frontier, Emerging and Developed. The results show that there is a meaningful relationship between different levels of economic development and the weak form market efficiency. Considering the nonlinear structure of the stock market indices, use of linear models might lead to wrong conclusions regarding market efficiency. Using several nonlinear panel root tests, the results of this study shed more light on the true data generating process of the stock market indices and more appropriately model market efficiency.

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