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COAR Access Rights: open accessSubject: nonlinear panel unit root

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    Article
    Citation - WoS: 35
    Citation - Scopus: 36
    Structural Break, Nonlinearity and Asymmetry: a Re-Examination of Ppp Proposition
    (Routledge Journals, Taylor & Francis Ltd, 2018) Omay, Tolga; Emirmahmutoglu, Furkan; Hasanov, Mubariz
    In this study, we examine the validity of the PPP proposition for 28 European countries. For this purpose, we propose a new unit root test procedure that allows for both gradual structural breaks and asymmetric nonlinear adjustment towards the equilibrium level. Small-sample properties of the new tests are examined through Monte-Carlo simulations. The simulation results suggest that the new tests have satisfactory size and power properties. We then apply these new tests along with other unit root tests to examine stationarity properties of real exchange rate series of the sample countries. Our tests reject the null of unit root in more cases when compared to alternative tests. Overall, we find that the PPP proposition holds in majority of the European countries examined in this article.
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    Article
    Citation - WoS: 1
    Citation - Scopus: 1
    Testing for Unit Roots in Nonlinear Dynamic Heterogeneous Panels With Logistic Smooth Breaks
    (Mdpi, 2023) Omay, Tolga; Ucar, Nuri
    In this study, we investigate the validity of the purchasing power parity (PPP) proposition for 34 European and selected global countries. For this purpose, we propose a new unit root test for cross-sectionally dependent heterogeneous panels that allows for gradual structural breaks and symmetric nonlinear adjustment toward the equilibrium level. The alternative hypothesis stationary is obtained by symmetric adjustment due to exponential smooth transition autoregression (ESTAR) around a nonlinear trend. Moreover, we provide small sample properties extensively for the newly proposed test. Hence, this alternative hypothesis has been proven to characterize real exchange rate data (REER) correctly. Thus, the newly proposed tests provide an essential basis for modeling the REER series correctly. Finally, we also derive the approximate asymptotic distribution of the proposed tests using new techniques.