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Article Citation - WoS: 9Citation - Scopus: 11Current Account and Credit Growth: the Role of Household Credit and Financial Depth(Elsevier Science inc, 2020) Ekinci, Mehmet Fatih; Ekinci, Mehmet Fatih; Omay, Tolga; Omay, Tolga; Ekinci, Mehmet Fatih; Omay, Tolga; Economics; EconomicsUnderstanding the impact of financial variables on the current account balance is one of the priorities of academic literature and policymakers. Evidence from a broad panel of advanced and emerging countries shows that an increase in credit growth is associated with a significant deterioration in the current account balance. When we examine the roles of the components of credit, we find that an increase in household credit causes a significant decline in the current account balance, whereas an increase in business loans has no significant effect. Therefore, our findings indicate that the significant negative impact of credit growth on the current account balance is driven by household credit. Furthermore, we show that total and household credit growth rates have a stronger negative effect on the current account balance for lower levels of financial depth. Our results suggest that targeted policy measures that curb household credit growth might be more effective to reduce external imbalances particularly at the early stages of financial deepening.Article A Computationally Efficient Approximation for Fractional Differencing: First-Order Operators(Pergamon-Elsevier Science Ltd, 2026) 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 - WoS: 31Citation - Scopus: 35Fractional 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: 10Citation - Scopus: 10Convergence of Economic Growth and Health Expenditures in Oecd Countries: Evidence From Non-Linear Unit Root Tests(Frontiers Media Sa, 2023) Celik, Esref Ugur; Omay, Tolga; Tengilimoglu, DilaverIntroductionThe relationship between human capital, health spending, and economic growth is frequently neglected in the literature. However, one of the main determinants of human capital is health expenditures, where human capital is one of the driving forces of growth. Consequently, health expenditures affect growth through this link. MethodsIn the study, these findings have been attempted to be empirically tested. Along this axis, health expenditure per qualified worker was chosen as an indicator of health expenditure, and output per qualified worker was chosen as an indicator of economic growth. The variables were treated with the convergence hypothesis. Due to the non-linear nature of the variables, the convergence hypothesis was carried out with non-linear unit root tests. ResultsThe analysis of 22 OECD countries from 1976 to 2020 showed that health expenditure converged for all countries, and there was a significant degree of growth convergence (except for two countries). These findings show that health expenditure convergence has significantly contributed to growth convergence. DiscussionPolicymakers should consider the inclusiveness and effectiveness of health policies while making their economic policies, as health expenditure convergence can significantly impact growth convergence. Further research is needed to understand the mechanisms behind this relationship and identify specific health policies most effective in promoting economic growth.Article Citation - WoS: 2Citation - Scopus: 2Phase and Wave Dependent Analysis of Health Expenditure Efficiency: a Sample of Oecd Evidence(Frontiers Media Sa, 2023) Boduroglu, Elif; Atici, Kazim Baris; Omay, TolgaIntroductionHealth expenditures are a factor that reflects the government's public health policy and contributes to the protection of national health. Therefore, this study focuses on measuring the effectiveness of health expenditures in order to evaluate and improve the public health system and policy during the pandemic period. MethodIn order to examine the effectiveness of health expenditures, the behaviors of the pandemic process were analyzed in two stages. The number of daily cases is analyzed in the first stage by dividing it into waves and phases according to the transmission coefficient (R). For this classification, the discrete cumulative Fourier function estimation is used. In the second stage, the unit root test method was used to estimate the stationarity of the number of cases in order to examine whether the countries made effective health expenditures according to waves and phases. The series being stationary indicates that the cases are predictable and that health expenditure is efficient. Data consists of daily cases from February 2020 to November 2021 for 5 OECD countries. ConclusionThe general results are shown that cases cannot be predicted, especially in the first stage of the pandemic. In the relaxation phase and at the beginning of the second wave, the countries that were seriously affected by the epidemic started to control the number of cas es by taking adequate measures, thus increasing the efficiency of their health systems. The common feature of all the countries we examined is that phase 1, which represents the beginning of the waves, is not stationary. After the waves fade, it can be concluded that the stationary number of health cases cannot be sustainable in preventing new waves' formation. It is seen that countries cannot make effective health expenditures for each wave and stage. According to these findings, the periods in which countries made effective health expenditures during the pandemic are shown. DiscussionThe study aims to help countries make effective short- and long-term decisions about pandemics. The research provides a view of the effectiveness of health expenditures on the number of cases per day in 5 OECD countries during the COVID-19 Pandemic.Article Citation - WoS: 5Citation - Scopus: 6High Persistence and Nonlinear Behavior in Financial Variables: a More Powerful Unit Root Testing in the Estar Framework(Mdpi, 2021) Omay, Tolga; Corakci, Aysegul; Hasdemir, EsraIn this study, we consider the hybrid nonlinear features of the Exponential Smooth Transition Autoregressive-Fractional Fourier Function (ESTAR-FFF) form unit root test. As is well known, when developing a unit root test for the ESTAR model, linearization is performed by the Taylor approximation, and thereby the nuisance parameter problem is eliminated. Although this linearization process leads to a certain amount of information loss in the unit root testing equation, it also causes the resulting test to be more accessible and consistent. The method that we propose here contributes to the literature in three important ways. First, it reduces the information loss that arises due to the Taylor expansion. Second, the research to date has tended to misinterpret the Fourier function used with the Kapetanios, Shin and Snell (2003) (KSS) unit root test and considers it to capture multiple smooth transition structural breaks. The simulation studies that we carry out in this study clearly show that the Fourier function only restores the Taylor residuals of the ESTAR type function rather than accounting forthe smooth structural break. Third, the new nonlinear unit root test developed in this paper has very strong power in the highly persistent near unit root environment that the financial data exhibit. The application of the Kapetanios Shin Snell- Fractional Fourier (KSS-FF) test to ex-post real interest rates data of 11 OECD countries for country-specific sample periods shows that the new test catches nonlinear stationarity in many more countries than the KSS test itself.Article Representation of Omitted Variable Bias With the Total Derivative Method(Universal Wiser Publisher, 2024) Omay, Tolga; Elitas, ZeynepThis study aims to provide an understanding of the concept of omitted variable bias through the total derivative method. This novel approach that is often overlooked could bring a new perspective to statisticians, econometricians, or researchers in neighboring disciplines such as social sciences, management, or economics. In order to complement this mathematical method, the study also employs graphical representations. By doing so, we provide a detailed walkthrough of the total derivative method, its visual depiction, and its application to the omitted variable bias. We believe that this approach can enhance the understanding of regression analysis and foster a deeper connection between mathematics and econometrics. Overall, this study can contribute to the development of new theoretical foundations using the total differential method in this context.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: 10Citation - Scopus: 11Is 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, TolgaThis 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.Article Dynamic Market Efficiency Assessment in Sustainability Indices: Rolling Fractional Integration Analysis with Multiple Estimators(Elsevier, 2025) 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.
