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Article Citation - WoS: 5Citation - Scopus: 5Historical Environmental Kuznets Curve for the Usa and the Uk: Cyclical Environmental Kuznets Curve Evidence(Springer, 2024) 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: 30Citation - Scopus: 34Fractional Unit-Root Tests Allowing for a Fractional Frequency Flexible Fourier Form Trend: Predictability of Covid-19(Springer, 2021) Omay, Tolga; Baleanu, DumitruIn 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.Article Citation - WoS: 2Citation - Scopus: 1Comparison of the Performance of Structural Break Tests in Stationary and Nonstationary Series: a New Bootstrap Algorithm(Springer, 2024) 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: 1Citation - Scopus: 2Controlling Heterogeneous Structure of Smooth Breaks in Panel Unit Root and Cointegration Testing(Springer, 2023) Omay, Tolga; Iren, PerihanThis 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.Article Citation - WoS: 20Citation - Scopus: 20Testing for Unit Roots in Dynamic Panels with Smooth Breaks and Cross-Sectionally Dependent Errors(Springer, 2018) Omay, Tolga; Hasanov, Mubariz; Shin, YongcheolWe 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.Article Citation - WoS: 15Citation - Scopus: 20Environmental Kuznets Curve: Non-Linear Panel Regression Analysis(Springer, 2020) Senturk, Huseyin; Omay, Tolga; Yildirim, Julide; Kose, NezirThis study presents an analysis of the relationship between per capita CO2 emissions as an environmental degradation indicator and per capita gross domestic product (GDP) as an economic growth indicator within the framework of the Environmental Kuznets Curve (EKC). For this purpose, non-linear panel models are estimated for the Annex I countries, non-Annex countries, and whole parties with respect to data availability of the United States Convention on Climate Change (UNFCCC) for the period 1960-2012. The empirical results of the panel smooth transition models (PSTR) show that the environmental deterioration rises in the first phase of growth for all data sets. Afterwards, the environmental degradation cannot be prevented, but the increase in the amount of environmental degradation decreases. The findings of this study give an insight regarding the differential environmental impact of economic growth between developed and developing countries. While the validity of a traditional EKC relation regarding the CO2 emissions cannot be affirmed for any group of countries in our sample, empirical results indicate the existence of multiple regimes where economic growth hampers environmental quality, but its severity decreases at each consecutive regime.Article Citation - WoS: 1Citation - Scopus: 1A Unit Root Test With Markov Switching Deterministic Components: A Special Emphasis on Nonlinear Optimization Algorithms(Springer, 2023) Omay, Tolga; Corakci, AysegulIn 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.Article Citation - WoS: 19Citation - Scopus: 12Using Double Frequency in Fourier Dickey-Fuller Unit Root Test(Springer, 2022) Cai, Yifei; Omay, TolgaWe 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.Article Citation - WoS: 5Citation - Scopus: 8Are CO2 Emissions Stationary After All? New Evidence from Nonlinear Unit Root Tests(Springer, 2022) Romero-Avila, Diego; Omay, TolgaThis 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.Article Citation - WoS: 1Citation - Scopus: 2Convergence of Ghgs Emissions in the Long-Run: Aerosol Precursors, Reactive Gases and Aerosols-A Nonlinear Panel Approach(Springer, 2023) Romero-Avila, Diego; Omay, TolgaAnthropogenic emissions of reactive gases, aerosols and aerosol precursor compounds are responsible for the ozone hole, global warming and climate change, which have altered ecosystems and worsened human health. Environmental authorities worldwide have responded to these climate challenges through the 2030 Agenda for Sustainable Development. In this context, it is key to ascertain empirically whether emission levels are converging among the countries forming the industrialized world. In doing so, we focus on 23 industrialized countries using a novel dataset with ten series of annual estimates of anthropogenic emissions that include aerosols, aerosol precursor and reactive compounds, and carbon dioxide over the 1820-2018 period. We apply four state-of-the-art panel unit root tests that allow for several forms of time-dependent and state-dependent nonlinearity. Our evidence supports stochastic convergence following a linear process for carbon dioxide, whereas the adjustment is nonlinear for black carbon, carbon monoxide, methane, non-methane volatile organic compounds, nitrous oxide, nitrogen oxides and sulfur dioxide. In contrast, ammonia and organic carbon emissions appear to diverge. As for deterministic convergence, carbon dioxide converges linearly, while black carbon, carbon monoxide, nitrogen oxides, non-methane volatile organic compounds and sulfur dioxide adjust nonlinearly. Our results carry important policy implications concerning the achievement of SDG13 of the global 2030 Agenda for Sustainable Development, which appears to be feasible for the converging compounds.
