Papers by Mehmet Balcilar
This paper shows that the presence of integrated technology shocks will prevent input prices and ... more This paper shows that the presence of integrated technology shocks will prevent input prices and sales from being cointegrated with inventories. It is further shown that the commonly used cointegration tests are not applicable to the inventory equation arising from a dynamic linear-quadratic (LQ) model, because of the long run endogeneity of the regressors and the moving-average error term. The paper examines suitable estimation methods for the LQ inventory model in the presence of endogenous regressors and moving-average errors. Using appropriate estimation methods, cointegration is found among inventories, material prices, and sales for two-digit sectoral data, thus, providing evidence against the presence of integrated technology shocks. The results also indicate that the implausible parameter estimates obtained by previous researchers are the result of inappropriate estimation methods and ignored structural changes.
Agricultural Economics
There is a growing consensus that food security is vital to the general wellbeing of any economy,... more There is a growing consensus that food security is vital to the general wellbeing of any economy, but a far less consensus on whether food security can spur economic growth in a country. Many economic growth strategies focus on specific interventions (trade openness index, tropical climatic variables, working age population share etc.), but many factors, such as food availability, female education and health outcomes, can potentially have a profound influence on economic growth. To explore this hypothesis more systematically, this paper employs a rich cross-country dataset of 124 countries to examine the impact of food security, using food availability as a proxy on economic growth. This paper examines the impact of food shortages on African economic growth rates. It does so by extending the Barro growth model to include food availability as a right hand-side variable and by distinguishing African countries with food shortages from others. Based on the cross-country regressions resu...
This paper investigates whether daily stock price indices from fourteen emerging markets are rand... more This paper investigates whether daily stock price indices from fourteen emerging markets are random walk (unit root) or mean reverting long memory processes. We use an efficient statistical framework that tests for random walks in the presence of multiple structural breaks at unknown dates. This approach allows us to investigate a broader range of persistence than that allowed by the I(0)/I(1) paradigm about the order of integration, which is usually implemented for testing the random walk hypothesis in stock market indices. Our approach extends Robinson's (1994) efficient test of unit root against fractional integration to allow for multiple endogenously determined structural breaks. For almost all countries, we find support for the random walk hypothesis, with the exception of four stock markets, where weak evidence of mean reverting long memory exist. Structural breaks have impact on the unit root behavior only for Mexico; for all other 11 markets unit roots exist even when s...
In this paper we set out to date-stamp periods of US housing price explosivity for the period 183... more In this paper we set out to date-stamp periods of US housing price explosivity for the period 1830 – 2013. We make use of several robust techniques that allow us to identify such periods by determining when prices start to exhibit explosivity with respect to its past behaviour and when it recedes to long term stable prices. The first technique used is the Generalized sup ADF (GSADF) test procedure developed by Phillips, Shi, and Yu (2013), which allows the recursive identification of multiple periods of price explo-sivity. The second approach makes use of Robinson (1994)'s test statistic, comparing the null of a unit root process against the alternative of specified orders of fractional integration. Our analysis date-stamps several periods of US house price explosivity, allowing us to contextualize its historic relevance.
In this paper we test whether the key metals prices of gold and platinum significantly improve in... more In this paper we test whether the key metals prices of gold and platinum significantly improve inflation forecasts for the South African economy. We also test whether controlling for conditional correlations in a dynamic setup, using bivariate Bayesian-Dynamic Conditional Correlation (B-DCC) models, improves inflation forecasts. To achieve this we compare out-of-sample forecast estimates of the B-DCC model to Random Walk, Autoregressive and Bayesian VAR models. We find that for both the BVAR and BDCC models, improving point forecasts of the Autoregressive model of inflation remains an elusive exercise. This, we argue, is of less importance relative to the more informative density forecasts. For this we find improved forecasts of inflation for the B-DCC models at all forecasting horizons tested. We thus conclude that including metals price series as inputs to inflation models leads to improved density forecasts, while controlling for the dynamic relationship between the included price series and inflation similarly leads to significantly improved density forecasts.
International Review of Economics & Finance, 2015
We use the Bayesian Markov-switching vector error correction (MS-VEC) model and the regime-depend... more We use the Bayesian Markov-switching vector error correction (MS-VEC) model and the regime-dependent impulse response functions (RDIRF) to examine the transmission dynamics between oil spot prices, precious metals (gold, silver, platinum, and palladium) spot prices and the US dollar/euro exchange rate. Using daily data from 1987 to 2012, two regimes (low and high volatility regimes) appear to be prevalent for this system. We find evidence that among the five commodity prices the gold prices are the most informative in the group in the high volatility regime, while gold, palladium, and platinum are the most informative in the low volatility regime. Though the platinum and palladium prices impact each other, the impacts in the high volatility regime are asymmetric. In addition to its low correlation in the group, palladium's negative impact on the exchange rate and gold makes it a reliable hedge asset for investors. Gold is the least volatile variable, thus affirming its use as a "safe haven" asset, while silver and oil are the most volatile in the group. Understanding the dynamics of these commodity prices should help investors decide how to invest during periods of low vs. highly volatile regimes.
ABSTRACT This study applies wavelet analysis to examine the relationship between the U.S. housing... more ABSTRACT This study applies wavelet analysis to examine the relationship between the U.S. housing and stock markets over the period 1890-2012.Wavelet analysis allows the simultaneous examination of co-movement and causality between the two markets in both the time and frequency domains. Our findings provide robust evidence that co-movement and causality vary across frequencies and evolve over time. Examining market co-movement in the time domain, the two markets exhibit positive co-movement over recent decades, except for 1998-2002 when a high negative co-movement emerged. In the frequency domain, the two markets correlate with each other mainly at low frequencies (longer term), except in the second half of the 1900s as well as in 1998-2002, when the two markets correlate at high frequencies (shorter term). In addition, we find that the causal effects between the markets in the frequency domain occur generally at low frequencies (longer term).In the time-domain, the time-varying nature of long-run causalities implies structural changes in the two markets. These findings provide a more complete picture of the relationship between the U.S. real estate and stock markets over time and frequency, offering important implications for policymakers (and practitioners).
In this study the short and the long run relationships between export performance and real effect... more In this study the short and the long run relationships between export performance and real effective exchange rate changes in Turkey are investigated using the quarterly data sets covering the period of 1995-2012. The other factors that are expected to affect export performance such as wage, foreign income, productivity, trend GDP and exchange rate volatility are also added to the model. The ARDL bounds testing approach is performed in the estimation process and the causalities among these variables in the model are determined based on the estimated ARDL models. The empirical results reveal that the variables of interest are cointegrated. Real effective exchange rate coefficient is significantly positive in the short run whereas negative in the long run and exchange rate volatility has no significant effect on export performance in contrast with theoretical expectations. Other evidences indicate that Turkey's export boom in the period examined can be explained by wages, productivity and world demand, rather than exchange rate changes. Consequently, these findings highlight that the policies depressing wages, stimulating high productivity and facilitating foreign market access can help export sectors increase their performance and competitiveness in Turkey.
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Papers by Mehmet Balcilar