Ferit Kula

Is there Really Divergence Across Turkish Provinces? Evidence From the Lagrange Multiplier Unit Root Tests

Using data on per capita income among 67 provinces in Turkey over the period 1975–2001, regional stochastic convergence is evaluated. This study employees the LM unit root test to endogenously determine the number and location of structural breaks for each province. On the contrary, convergence literature on Turkish provinces, both univariate and panel LM tests provide strong evidence for convergence except for the provinces of Bitlis and Erzurum when structural breaks are taken into account. Our empirical results are in accordance with the neoclassical model.

Additional evidence of long-run purchasing power parity with black and official exchange rates

In this study, the validity of Purchasing Power Parity (PPP) hypothesis is investigated by using unit root test on official and black market exchange rates for Turkey. When we used the classical unit root test, we found poor evidence for the validity of PPP in classical PP test but no evidence for PPP in the augmented Dickey–Fuller test. However, by using Zivot–Andrews test allowing for one structural break in the series of PPP, we find stronger evidence for both official and black market exchange rates. Our findings illustrate that the unit root test with structural break is powerful than classical ones for long-run PPP.

Hysteresis vs. Natural Rate of Unemployment: One, the Other, or Both?

Hysteresis vs. Natural Rate of Unemployment: One, the Other, or Both? This paper re-examines the empirical validity of the hysteresis hypothesis in unemployment rates by education level in 17 OECD countries. To this end, for an unbalanced panel, we employed Pesarans Cross-Sectional Dependence (CD) and Cross-Sectionally Augmented ADF (CADF) tests. Our empirical findings provide evidence favorable to the non-stationarity of unemployment rates according to levels of primary and secondary education attainment in total unemployment, and therefore the existence of hysteresis for these levels of education. There is no evidence, however, of hysteresis for unemployment rates by tertiary education.

PURCHASING POWER PARITY IN MENA REVISITED: EMPIRICAL EVIDENCE IN THE PRESENCE OF ENDOGENOUSLY DETERMINED BREAK POINTS

Abstract This paper re-examines the Purchasing Power Parity hypothesis in which the endogenously determined break points are incorporated in 13 major MENA countries by using official and black market exchange rates data over 1970-1998. We utilize Lagrange Multiplier unit root test that endogenously determines structural breaks in level. We find evidence of PPP for eight of the thirteen countries at the 10% level or better. We also construct the half lives to investigate the persistence of deviations from PPP. The point estimates of the half lives for both OREX and BMREX in the seven countries are lower than range of the consensus of 3-5 years in the literature.

On asymmetry effects of exchange rate volatility in Turkey

In this paper, we examine the issue of volatility for both official and black market exchange rates of the Turkish lira using the monthly exchange rate against the US dollar for the period 1969-1998. The main findings are: 1) conditional shocks have a positive effect on exchange rate volatility; 2) shocks having asymmetric effects on official exchange rate volatility are more effective than that obtained from black market; 3) while an increase in official exchange rate volatility leads to a depreciation of the Turkish lira vis-a-vis the US dollar, an appreciation is observed for black market.