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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: 21Citation - Scopus: 26Is There Really Hysteresis in the Oecd Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test(Springer, 2021) Omay, Tolga; Shahbaz, Muhammad; Stewart, ChrisWe investigate the hysteresis hypothesis by proposing a heterogeneous panel unit root test that allows for gradually changing trends and cross-sectional dependence (CSD) among panel members using a flexible Fourier form. Inconclusive results from previous studies are potentially due to using very restrictive specifications with homogenous break structures and/or exogenously determined abrupt breaks. We seek to address these limitations by employing general specifications that are more capable of characterising the true data generation process of unemployment and by allowing for spill-over effects using a bootstrapping procedure to accommodate CSD that must be considered in a globalized world. Extensive simulations suggest that the failure to take structural breaks and CSD into account can lead to misleading conclusions about whether the unemployment rate is stationarity. We apply our test procedure to unemployment data for 23 OECD countries and find conclusive evidence against the hysteresis hypothesis for all these countries.
