Regression Analysis with a Stochastic Design Variable

In regression models, the design variable has primarily been treated as a nonstochastic variable. In numerous situations, however, the design variable is stochastic. The estimation and hypothesis testing problems in such situations are considered. Real life examples are given.     

Inflation Dynamics and its Sources in the Ottoman Empire: 1586–1913

This study examines the dynamics and determinants of inflation in the Ottoman Empire during the 1586–1913 period. There are two possible reasons for inflation: fiscal expansion and monetary expansion, which could be generated through the debasement of local currency (Akçe). We used a set of political and structural variables in order to explain the change in inflation dynamics. In particular, we considered the war years, periods of Ottoman history that show different characteristics (the slow‐down period, the recession period and the break‐up period) and the period of constitutional monarchy. Moreover, we tested whether the inflation process was the same for each sultan and whether each sultan’s behavior during the first year was different from the rest of his reign. The empirical evidence reported here suggests that war accelerated inflation as expected and fiscal expansion rather than the debasement of the Akçe was the main reason for inflation. Moreover, the slow‐down, the recession and the break‐up periods affected inflation positively; both fiscal expansion and the debasement of the Akçe were seen in these three periods as sources of inflation. While employing different inflationary policies during his reign, each sultan accelerated inflation in the first year of his reign by the debasement of the Akçe or by fiscal expansion. Last, the constitutional monarchy period had a significant positive effect on inflation although fiscal expansion, rather than the debasement of the Akçe, was the source of inflation during this period.     

Stock market return and volatility: day-of-the-week effect

This paper examines the stock market returns and volatility relationship using US daily returns from May 26, 1952 to September 29, 2006. The empirical evidence reported here does not support the proposition that the return-volatility relationship is present and the same for each day of the week.     

The Fisher hypothesis: a multi-country analysis

This paper tests whether the Fisher hypothesis holds for a sample of 26 countries by assessing the long run relationship between nominal interest rates and inflation rates taking into consideration the short run dynamics of interest rates. The empirical evidence supports the hypothesis that there is a one-to-one relationship between the interest rate and inflation for more than half of the countries under study.     

OUTPUT–EMPLOYMENT RELATIONSHIP ACROSS SECTORS: A LONG‐ VERSUS SHORT‐RUN PERSPECTIVE

This paper investigates the nature of the output–employment relationship by using the Turkish quarterly data for the period 1988–2008. Even if we fail to find a long‐run relationship between aggregate output and total employment, there are long‐run relationships for the aggregate output with non‐agricultural employment and sectoral employment levels for seven of nine sectors that we consider. However, a further investigation for the output and employment relationship within a short‐run perspective does not reveal statistically significant relationships for either total employment or non‐agriculture employment, or eight of the nine sectors that we consider. Although there are various long‐run relationships between output and employment, the short‐run links between demand and employment are weak. The various implications of this for the economy and the labour market are discussed. As a result, maintaining high levels of output in the long‐run creating demand is essential for employment generation.     

A Generalization of the Lone Wolf Theorem

A non‐constructive generalization of the ‘lone wolf’ theorem, which states that in the roommates problem an agent is single in a stable matching if and only if that agent is single in every other stable matching, is presented. The generalization is in two directions: (i) the set of permissible roommates is arbitrary as long as all singles are allowed, and (ii) the set of preference profiles is any subset of the set of all profiles of strict preferences defined over permissible roommates.     

Effects of USD–Euro parity on a small open economy: evidence from Turkey

This study assesses the effect of USD–Euro parity on a small open economy where exports are predominantly denominated in Euros and imports are denominated in USD. Empirical evidence from Turkey suggests that a positive change in the USD value of the Euro appreciates the local currency, decreases inflation and increases output.     

The process of technical change in UK manufacturing

This paper tests the validity of the Fisher hypothesis, which establishes a positive relation between interest rates and expected inflation, for the G7 countries and 45 developing economies. For this purpose, we estimate a version of the GARCH specification of the hypothesis for all countries included in the sample. We also test the augmented Fisher relation by including the inflation uncertainty in the equation. The simple Fisher relation holds in all G7 countries but in only 23 developing countries. There is a positive and statistically significant relationship between interest rates and inflation uncertainty for six of the G7 and 18 of the developing countries and this relationship is negative for seven developing countries.     

Business cycles through international shocks: A structural investigation

This paper investigates the sources of output volatility by decomposing the international shocks into finance and trade shocks. Through structural Bayesian estimations of an open-economy DSGE model on 16 countries, on average, international shocks explain around 70% of output fluctuations.     

Can inflation targeting regimes be effective in developing countries? The Turkish experience

This paper examines the performance of Turkey's inflation targeting (IT) experience. We find the IT regime to be an effective framework. Our judgment is based on three broad conclusions supported by empirical analyses. First, fiscal stability is an effective tool for a successful monetary policy. Second, the overnight policy of the Central Bank of Turkey rate is a significant determinant of the changes in market lending rates, which is the preliminary step in the monetary transmission mechanism. Third, recent developments on the broader issue of the effectiveness of interest rate policy in controlling inflation through aggregate demand management and through other channels are encouraging. Based on our findings, we argue that the impact of policy rate changes on economic activity and inflation have become more predictable and changed in the direction in line with theory, improving the transmission capacity of monetary policy.