Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests

In this paper we address efficiency of eight transition stock markets, namely, Bulgarian, Chinese, Czech, Hungarian, Polish, Romanian, Russian and Slovakian stock markets by testing whether the price series of these markets contain unit root. For this purpose we employ the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) that has a better power than standard unit root tests when series under consideration are characterised by a slower speed of mean reversion. The results of nonlinear unit root tests indicate that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency.Market Efficiency, Non-linear models, transition markets

Effects of inflation uncertainty on output: the case of Turkey

Bu çalışmada, Türkiye için enflasyon belirsizliğinin üretim açığı üzerindeki etkisi, 1986 - 2006 dönemi verileri kullanılarak tahmin edilmiştir. Analizin kapsadığı dönem, hem yüksek enflasyon, hem de düşük enflasyon dönemlerini içerdiği için enflasyon belirsizliğinin etkilerini analiz etmek açısından ilginç bir örneklem oluşturmaktadır. Yapılan analizler, enflasyon belirsizliğinin, hem yüksek enflasyon döneminde, hem de dezenflasyon sürecinde üretim açığı üzerinde negatif ve istatiksel olarak anlamlı etkiye sahip olduğunu göstermektedir. Elde edilen bu sonuçlar, enflasyon oranını düşürmenin yanısıra, düşük düzeyde sabit tutulmasının da büyüme açısından önemli olduğunu ortaya koymaktadır.In this paper we estimate the effects of inflation uncertainty on output gap in Turkey using monthly data for the 1986 - 2006 period. Since it includes both high and low inflationary periods, the said period offers a good sample for assessing the effects of uncertainty on output. The results suggest that inflation uncertainty had negative and statistically significant effects on output both in high inflation and disinflation periods. Our findings imply importance of stabilising inflation at low levels for economic growth

A nonlinear estimation of monetary policy reaction function for Turkey

In this paper we have estimated the monetary reaction function of the Central Bank of Republic of Turkey. The originality of the paper is that we have used smooth transition functions (STR) that allow for proper modelling of nonlinearities and asymmetries in the relationship between variables under consideration. The estimated models suggest that the backward-looking instead of foreward-looking models best characterise the CBRT’s reaction function, that is, the CBRT reacted to past inflation rates rather than to future rates. This finding is in conformity with earlier research. We have found that the main purpose of expansionary policy of the CBRT is to stabilise output whereas contractionary policies aimed only at reducing the inflation rate. The fact that the CBRT has disregarded inflation in conducting expansionary policy and focused only on output stabilisation may explain why the CBRT was not successful in fighting inflation. Besides, neither in expansionary policy regime nor in contractionary policy regime, real exchange rate is not targeted by CBRT. Moreover, budget deficit is targeted only in the contractionary policy regime.para politikası reaksiyon fonksiyonu; STR modeli; asimetri; IV teknigi.

Türkiye için reaksiyon fonksiyonunun doğrusal olmayan modelle tahmin edilmesi

In this paper we have estimated the monetary reaction function of the Central Bank of Republic of Turkey. The originality of the paper is that we have used smooth transition functions (STR) that allow for proper modelling of nonlinearities and asymmetries in the relationship between variables under consideration. The estimated models suggest that the backward-looking instead of foreward-looking models best characterise the CBRT’s reaction function, that is, the CBRT reacted to past inflation rates rather than to future rates. This finding is in conformity with earlier research. We have found that the main purpose of expansionary policy of the CBRT is to stabilise output whereas contractionary policies aimed only at reducing the inflation rate. The fact that the CBRT has disregarded inflation in conducting expansionary policy and focused only on output stabilisation may explain why the CBRT was not successful in fighting inflation. Besides, neither in expansionary policy regime nor in contractionary policy regime, real exchange rate is not targeted by CBRT. Moreover, budget deficit is targeted only in the contractionary policy regime

Türkiye için reaksiyon fonksiyonunun doğrusal olmayan modelle tahmin edilmesi

In this paper we have estimated the monetary reaction function of the Central Bank of Republic of Turkey. The originality of the paper is that we have used smooth transition functions (STR) that allow for proper modelling of nonlinearities and asymmetries in the relationship between variables under consideration. The estimated models suggest that the backward-looking instead of foreward-looking models best characterise the CBRT’s reaction function, that is, the CBRT reacted to past inflation rates rather than to future rates. This finding is in conformity with earlier research. We have found that the main purpose of expansionary policy of the CBRT is to stabilise output whereas contractionary policies aimed only at reducing the inflation rate. The fact that the CBRT has disregarded inflation in conducting expansionary policy and focused only on output stabilisation may explain why the CBRT was not successful in fighting inflation. Besides, neither in expansionary policy regime nor in contractionary policy regime, real exchange rate is not targeted by CBRT. Moreover, budget deficit is targeted only in the contractionary policy regime

Energy consumption and economic growth: evidence from nonlinear panel cointegration and causality tests

In this paper, we propose a nonlinear cointegration test for heterogeneous panels where the alternative hypothesis is an exponential smooth transition (ESTAR) model. We apply our tests for investigating cointegration relationship between energy consumption and economic growth for the G7 countries covering the period 1977-2007. Moreover, we estimate a nonlinear Panel Vector Error Correction Model in order to analyze the direction of the causality between energy consumption and economic growth. By using nonlinear causality tests we analyze the causality relationships in low economic growth and high economic growth regimes. Furthermore, we deal with the cross section dependency problem in both nonlinear panel cointegration test and nonlinear Panel Vector Error Correction Model

Energy consumption and economic growth: evidence from nonlinear panel cointegration and causality tests

In this paper, we propose a nonlinear cointegration test for heterogeneous panels where the alternative hypothesis is an exponential smooth transition (ESTAR) model. We apply our tests for investigating cointegration relationship between energy consumption and economic growth for the G7 countries covering the period 1977-2007. Moreover, we estimate a nonlinear Panel Vector Error Correction Model in order to analyze the direction of the causality between energy consumption and economic growth. By using nonlinear causality tests we analyze the causality relationships in low economic growth and high economic growth regimes. Furthermore, we deal with the cross section dependency problem in both nonlinear panel cointegration test and nonlinear Panel Vector Error Correction Model

Structural Break, Nonlinearity, and Asymmetry: A re-examination of PPP proposition

In this study, we propose a new unit root test procedure that allows for both gradual structural break and asymmetric nonlinear adjustment towards the equilibrium level. Small-sample properties of the new test are examined through Monte-Carlo simulations. The simulation results suggest that the new test has satisfactory size and power properties. We then apply this new test along with other unit root tests to examine stationarity properties of real exchange rate series of the sample countries. Our test rejects 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 paper

Structural Break, Nonlinearity, and Asymmetry: A re-examination of PPP proposition

In this study, we propose a new unit root test procedure that allows for both gradual structural break and asymmetric nonlinear adjustment towards the equilibrium level. Small-sample properties of the new test are examined through Monte-Carlo simulations. The simulation results suggest that the new test has satisfactory size and power properties. We then apply this new test along with other unit root tests to examine stationarity properties of real exchange rate series of the sample countries. Our test rejects 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 paper

Re-examining Purchasing Power Parity for the Australian Real Exchange Rate

In this paper, we re-examine stationarity of the Australian real exchange rate (RER). For this purpose, we modify the test of Kapetanios et al. [Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics 112 (2003), 359-379] to allow for a nonlinear trend function in the data generating process. Using bootstrap techniques, we show that the null hypothesis of unit root can be rejected, providing evidence in favour of PPP proposition for the Australian RER.Purchasing Power Parity; Nonlinearity; Unit Root