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Article Citation - WoS: 37Citation - Scopus: 38Structural Break, Nonlinearity and Asymmetry: a Re-Examination of Ppp Proposition(Routledge Journals, Taylor & Francis Ltd, 2018) Omay, Tolga; Emirmahmutoglu, Furkan; Hasanov, MubarizIn 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.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.
