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Author: Omay, TolgaSubject: Cross-section dependence

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    Article
    Citation - WoS: 13
    Citation - Scopus: 14
    Inflation-Growth Nexus: Evidence From a Pooled Cce Multiple-Regime Panel Smooth Transition Model
    (Physica-verlag Gmbh & Co, 2018) Omay, Tolga; van Eyden, Renee; Gupta, Rangan
    This paper analyses the empirical relationship between inflation and growth using a panel data estimation technique, multiple-regime panel smooth transition regression, which takes into account the nonlinearities in the data. By using a panel data set for 10 countries in the Southern African Development Community permitting us to control for unobserved heterogeneity at both country and time levels, we find that a statistically significant negative relationship exists between inflation and growth for inflation rates above the critical threshold levels of 12 and 32% which are endogenously determined. Furthermore, we remedy the cross-section dependence with the common correlated effects estimator.
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    Article
    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.