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Article Citation - WoS: 1Citation - Scopus: 1Re-Examining the Real Interest Rate Parity Hypothesis Under Temporary Gradual Breaks and Nonlinear Convergence(Springer Heidelberg, 2023) Hasanov, Mubariz; Omay, Tolga; Abioglu, VasifThis paper investigates the real interest parity hypothesis by testing stationarity of real interest rate differentials for 52 countries with respect to the USA. Taking account of the fact that both asymmetric adjustment and gradual temporary breaks may better characterize the dynamics of real interest rate differentials, we propose a new test that allows for two temporary shifts together with asymmetric adjustment towards the equilibrium. We employ the newly proposed test procedure along with the conventional ADF test as well as nonlinear KSS and OSH tests to examine stationarity of real interest rate differentials. Among the main results, we find that the newly proposed unit root test procedure highly outperforms the existing unit root tests in terms of rejecting the null hypothesis of unit root. Our results suggest that real interest rate differentials can be characterized by a stationary process with asymmetric adjustment around gradual and temporary shifts of mean.Article Citation - WoS: 4Citation - Scopus: 5A Long-Run Convergence Analysis of Aerosol Precursors, Reactive Gases, and Aerosols in the Brics and Indonesia: Is a Global Emissions Abatement Agenda Supported?(Springer Heidelberg, 2023) Romero-Avila, Diego; Omay, TolgaThis article examines the hypothesis of deterministic emissions convergence for a panel of the BRICS and Indonesia to advanced countries' emissions levels as well as to Sweden (which is a country that has clearly gone through decoupling) using a novel dataset with ten series of annual estimates of anthropogenic emissions comprising aerosols, aerosol precursor and reactive compounds, and carbon dioxide from 1820 to 2018. For that purpose, we employ four novel panel unit root tests allowing for several forms of time-dependent and state-dependent nonlinearity. The evidence supports deterministic convergence following a linear process for carbon dioxide, whereas the adjustment is asymmetric and nonlinear for carbon monoxide. Methane and nitrogen oxides exhibit logistic smooth transition converging dynamics. In contrast, black carbon, ammonia, nitrous oxide, non-methane volatile organic compounds, organic carbon, and sulfur dioxide emissions diverge. These results have implications for the abatement of greenhouse gases emissions at the global level, given the high share of emissions of the BRICS.Article Citation - WoS: 14Citation - Scopus: 14A Regime Switching Model for Temperature Modeling and Applications To Weather Derivatives Pricing(Springer Heidelberg, 2020) Turkvatan, Aysun; Omay, Tolga; Hayfavi, Azize; Omay, Tolga; Omay, Tolga; Economics; EconomicsIn this study, we propose a regime-switching model for temperature dynamics, where the parameters depend on a Markov chain. We improve upon the traditional models by modeling jumps in temperature dynamics via the chain itself. Moreover, we compare the performance of the proposed model with the existing models. The results indicate that the proposed model outperforms in the short time forecast horizon while the forecast performance of the proposed model is in line with the existing models for the long time horizon. It is shown that the proposed model is a relatively better representation of temperature dynamics compared to the existing models. Furthermore, we derive prices of weather derivatives written on several temperature indices.Article Citation - WoS: 5Citation - Scopus: 6The Effects of Energy-Intensive Meat Production on Co2 Emissions: Evidence From Extended Environmental Kuznets Framework(Springer Heidelberg, 2022) Bor, Ozgur; Omay, Tolga; Iren, Perihan; Aktan, CeydaThis study documents the positive relationship between meat production and CO2 emissions by utilizing the environmental Kuznets framework. Relationships between energy consumption, economic growth, meat production, and the levels of CO2 are tested using 6 different variables (CO2 emissions, GDP, energy consumption, forest area, total meat, and total livestock). Data for the study is related to the G7 countries and covers the period between 1961 and 2016. The analysis of the data is then conducted using a panel threshold model. Moreover, the extended EKC model does not only consider the income as the state variable but also examines the nonlinear structure inherited in other explanatory variables as a state variable. In this way, we have seen the nonlinear effects of other variables' evolution over time on carbon emission. The overall results indicate that the production of meat significantly increases CO2 emissions.
