Theses supervised by Mehmet Balcılar
11 theses · Eastern Mediterranean University
The Impact of the Presence of Natural Gas Pipeline on House Prices: Evidence from 5 Northern States in the US
In this study, we focused on explaining the relationship between house pricing and natural gas pipeline. Using a quarterly frequency dataset, we focus our analysis on the selected 5 northern states in the US over the time span of 1991-2015 and also included some other control variables like Natural gas consumption by residential sector, population, Heating and Cooling degree days. Since house pricing is not normally distributed, we employed quantile regression, concentrating on fixed effect quantile estimate. Our empirical analyses reveal that natural gas pipeline has no significant impact in determining the variability in house pricing and the results further explain that the fixed effect statistic of the natural gas pipeline inflow is insignificant across quantiles. Furthermore, this study reveals that Population is highly significant across all quantiles, having a positive impact on house pricing. The significance and impact of the rest of the control variable are further discussed in the study. Finally, our result presents that natural gas pipeline does not have any significant impact on housing value, and this result can be adopted and used across all other regions and countries.
Impact of Food Availability on Economic Growth and Child Mortality: A Cross Country Comparative Analysis
The aim of this study is to examine the impact of food availability on economic growth and child mortality; especially within food insecure African countries where child mortality is high and economic growth is considered as the highest hurdle to overcome. This study made use of both empirical and statistical tools to achieve its objective. The empirical aspect consists of two parts. First, Solow growth model was used to explore the impact of food security on economic growth within 124 countries, including food insecure African countries, for the period 1970-2007; the result posits that food security has a positive impact on economic growth in all the 124 countries and it has even greater impact on economic growth within food insecure African countries. Second, this study examined the impact of food security on child mortality (infant mortality and under-five mortality), using a dynamic panel data analysis for 114 countries for the period 1995-2009 by considering a wide range of controlled variables such as income, social indicators and policy variables. The result suggests that food security has a negative impact on child mortality for all countries and even more impact on child mortality within food insecure African countries. Therefore, based on the findings of this study; it is recommended that an increase in food security is indeed a positive policy option, particularly within food insecure African countries, since it not only enhances economic growth but also ensures a decrease in child mortality within these countries. Keywords: African Dummy, Economic Growth, Food Crisis, Food Availability, Africa.
Forecasting Energy Prices Using Data Mining Methods
Energy prices have been playing an increasingly significant role in the world economy since all elements involved in this area are considered as a major input for the production. The energy prices as it affect economic variables in the world, is influenced by economic activities of great countries. Indicatively, oil prices which are a major energy index globally are affected by economic activities of great countries, and when such activities are on the decrease, the economy of the industrial countries slips into recession. The energy market is a complex market which does not follow the random walk process. There are many reasons behind the complexity of the energy market such as political situation, etc. Therefore prediction of this type of market is a difficult task. This study aims to investigate, model and forecast the whole US energy market as an important energy market in the world using different machine learning methods. Besides that, the effect of the US inflation on the volatility of the energy market has as well examined. Keywords: Forecasting, Neural Networks, US Energy Market, LPPL Models, Data mining methods
On the Determinants and Effect of Employment: An Empirical Assessment of Tourism and Innovation
The primary objective of this theses is to determine the determinants and effect of employment with particular regards to innovation and tourism. To this end, the thesis is divided into two self-contained sections. In the first section, the innovation employment nexus is analysed in a panel of 8 Asian economies within the framework of a panel cointegration methodology. Pooled mean group, mean group and the dynamic fixed effects estimators were employed to obtain the short-run values and the long run equilibrium values within a linear and non-linear specification. While the linear specification produced mixed results, the non-linear specification indicated a U-shaped non-linear relationship between r&d and employment with a local minimum at about the 75th percentile of the r&d data range. In the second section panel cointegration methodologies were employed to ascertain the impact of innovation on sectoral employment. FMOLS estimation results show that while r&d is employment creating in the services and high-tech manufacturing sectors, it is however employment constraining in the low-tech manufacturing sector. The third section examines how employment affects demand for tourism in the short and long run, controlling for the effects of income and relative prices within a panel of 32 Organisation for Economic Co-operation and Development (OECD) countries throughout the 1995–2016 period. Because of this, second-generation panel unit root tests, panel cointegration tests and panel data estimation techniques are employed. Results indicate that while employment has a positive association with outbound tourism in the short-run, its positive effect on outbound tourism in the long-run is however insignificant. Causality results uncover causality flowing from income to employment with a feedback, uni-directional causality flowing from income to outbound tourism and causality flowing from relative prices to outbound tourism with a feedback. Keywords: Innovation, Employment, Panel Cointegration, Cross-sectional Dependence, Causality.
Risk Spillover and Macroeconomic Interactions Across Energy, Stock and Agricultural Markets
Energy related topics are very common in the literature of economics since the oil crisis in 1973. So, energy economics became one of the hottest topics in the world‘s agenda. On the other hand, energy markets are also known as commodity markets and these are complex, dynamic and increasingly global markets all around the world. As we know from the literature, fluctuation of oil prices affects the economy as a whole and has a huge impact on the economy. Their impacts are changed from national to international levels. Therefore, because of this reason, this makes oil market very important and everybody tries to follow and understand the impacts of both current and future changes on the economy. In this study, we focus on the oil market and try to see the relationship between oil prices, stock exchange market and real effective exchange rate. On the other hand, using a time-varying parameter VAR we study the coherence, conditional volatility and impulse responses of the exchange rates and stock markets to oil price shocks over specific periods and policy regimes for GCC countries. On the other hand, another chapter of this study is used Time Varying Parameter Stochastic Volatility in Mean (TVP – SVM) model in order to measure the impact of uncertainty shocks on food prices in G-7 countries. The estimation results show important evidence of the time variation in the impact of food price uncertainty on food price. Finally, this study is also aimed to investigate the relationship between oil price movements and macroeconomic aggregates, such as GDP, CPI, and unemployment, for OECD countries. To do this, second generation econometric methods have been employed to panel data including panel unit root tests, panel cointegration tests, and panel long-run models. Keywords: Energy, GCC, G-7, OECD, oil prices, stock exchange market, real effective exchange rate, food prices, GDP, CPI, and unemployment
Economic Analysis of Insurance, Uncertainty and Economic Growth
The first essay examines whether there is a relationship between Africa’s economic growth and insurance-market activity (life, non-life, and total). Applying panel-estimation techniques that are robust to heterogeneity and cross-sectional dependence to a model of panel data for 11 African countries between 1995 and 2016, we find significant evidence in support of such a relationship. Total-insurance penetration has a long-term impact on economic growth, and when disaggregated into its components (life- and non-life-insurance penetration), we find evidence in support of short-term and long-term impacts on economic growth in both cases. Our study also confirms the feedback hypothesis, as we find a positive, bi-directional causality between insurance-market activity and economic growth. We also find that the contribution from non-life-insurance market activity toward economic growth far outweighs that of life-insurance market activity. The second essay examines whether the roles of the insurance and banking sectors are complimentary or substitutive in terms of growth effect. Using a dynamic panel-GMM estimation technique, we evaluate the synergistic effect of both sectors on economic growth in a panel of 10 African countries. The insurance-banking-growth nexus was also examined through bootstrap panel causality tests. The results show that life insurance market and the banking sector are complimentary and that the non-life insurance market and the banking sector are also complimentary. We find that overall, the relationship between the insurance and banking sectors in Africa is a complimentary one and that their synergistic impact on economic growth is positive. The feedback hypothesis was also confirmed in the relationship between the insurance sector and economic growth and between the banking sector and economic growth. The third essay tests for asymmetric causal relationships between financial systems (insurance markets, banking systems and stock markets) and economic performance in nine African countries over a 24-year period. This section of the study posits that it is important that asymmetric causal effects are taken into account when empirically examining the finance-growth nexus since it is possible that the economy (financial system) would react differently to changes in financial system (economy), depending on whether it is a positive or negative change. It proposes testing for asymmetric causality by using cumulative sums of positive and negative shocks via a bootstrap simulation approach. The results show that the pattern of causality varies across the selected countries and the following hypotheses were confirmed: negative and positive demand-following hypotheses, negative and positive supply-following hypotheses, and negative and positive feedback hypotheses. The final essay investigates the impact of economic policy uncertainty on insurance premiums, controlling for the effect of real income, in a panel of 15 countries over the period 1998-2016. Findings from the error correction based panel estimations show that the insurance sector is not immune to the effects of economic policy uncertainty and real income. Economic policy uncertainty initially raises insurance premiums in the short run but eventually lessens it in the long run whereas real income increases insurance premiums both in the short and long run, although its long run impact is greater than the short run impact. Also, economic policy uncertainty exerts a bigger influence on non-life insurance premium than on life insurance premium. Keywords: Insurance market; Financial systems; Economic growth; Africa; Panel ARDL; Dynamic GMM; symmetric & asymmetric Causality; Synergistic effect; Economic policy uncertainty.
The Connectedness of the Housing Market, Energy Market and Agricultural Commodities in the United States
In the first part of this dissertation, we investigate the dynamic response of renewable energy consumption to long-run and short-run impact of agricultural land usage for the period 1995-2014 in sixteen Coastline Mediterranean Countries (CMC-16). For this reason, a dynamic Autoregressive Distributed Lag (ARDL) approach is employed in a multivariate framework such that carbon emission and GDP are employed as additional variables in the model. With a speed of adjustment of 19.6% from short-run disequilibrium to long-run, the respective panel impacts of the real gross domestic product per capita and agricultural land are 16.31 (positive) and 0.78 (negative) in the long-run. Importantly, there is empirical evidence and significant short-run impact of agricultural land usage on renewable shares in total energy consumption in seven (7) of the CMC-16. Also, Granger causality evidence from carbon emission and GDP to renewable energy are all with feedbacks. However, Granger causality from agricultural land usage to renewable energy is without feedback. In the region, effective policy implementations through the collaborative effort of stakeholders will ensure a sustainable renewable energy development amidst agricultural activities. Proceeding further, rather the housing construction policy vis-à-vis dwellings, building and residential developments is incorporated to examine its impact on the renewable shares in total energy consumption in Spain, France, Slovenia, Greece, Turkey, Lebanon and Israel. The dynamic heterogeneous Pooled Mean Group approach is adopted for the investigation over a period of 1999 to 2015 with real gross domestic product per capita and the carbon emission being employed as additional variables. While a statistically significant and negative long-run impact is observed from the housing construction policy (3.73) and carbon emission (2.01), the impact of the real GDP is statistically significant and positive (0.00079). The panel will significantly adjust to long-run equilibrium under an unforeseen disturbance at a moderate annual speed of about 45.8%. The inference from the cross-section and short-run indicates that only in Israel is the housing construction policy having a significant impact on the renewable shares in total energy consumption. However, a feedback of Granger causality is significant from carbon emission to the renewables and the housing construction policy. Moreover, the response (using the Markov switching model) of renewable energy equity to prices of corn, soybean and wheat for the period 20/01/2012 -2/08/2018 for the United States is investigated. Given the statistically significant evidence of switching parameters, we found positive impacts of soybean and wheat on the renewable energy equity in both the stable and recession regimes while the impact is negative in the regimes for corn. The positive impact of soybean is an indication that the share of renewable energy and share of its export is highest while corn has recently been preferred for food rather than a source of renewable energy. Lastly, this research considers the measurement of return and volatility spillovers among the United States market components: renewable equity, Crude oil WTI and Brent (energy market), REIT (the housing market), and the wheat, corn and Soybeans (agricultural commodities). Using the novel approach of Diebold and Yilmaz (2012) for the sample period January 20, 2012 to August 2, 2018, the findings suggest the following empirical regularities. First, although low in magnitude, there is return and volatility shock transmissions among the components of the markets (housing market, energy market, and the agricultural commodities). Second, among the market components, the total net volatility spillovers is higher than the total net returns. Lastly, with a smaller sample size, the total net vitality spillovers is higher than the investigated full sample size. Moreover, our investigation further reveals significant evidence of pairwise directional volatility spillovers. Keywords: Renewable Energy, Housing Market, Agricultural Commodities, Carbon Emission, ARDL model; Markov Switch Model, Diebold and Yilmaz Approach.
Dynamic Linkages among the Real Economic Activity, Asset Prices and Macroeconomic Policy in Turkey
The purpose of this study is to analyze dynamic linkages among the real economic activity, asset prices, and monetary policy in Turkey. Thus, the effect of stock prices on consumption and interest rate through a time-varying vector autoregressive model is firstly examined for the period of 1987:Q1 and 2013:Q3. Then, the study investigates the relationship between asset prices and fiscal policy shocks for the period of 1988:Q1 and 2014:Q2 through Bayesian vector autoregressive model. Finally, the study employs the generalized autoregressive conditional heteroscedasticity volatility modelling to test the influence of Federal Market Committee minutes on asset prices in BRICS and Turkey for different time periods. As a result of the analyses, the research findings confirm that a positive shock to real stock price positively affects consumption. There are also significant effects regarding the impact of stock prices on interest rate and consumption for the years 1994, 2000, 2007, and 2011 in Turkey. The results obtained from the second method confirm that fiscal policy shocks significantly affect house and stock price indexes. The results of the final model reveal that the influence of FOMC releases is very strong in Brazil, Russia, South Africa and Turkey. There is also a negative return effect in Turkey when there is volatility in both India and China. Lastly, policy recommendations are presented to improve macroeconomic stabilization and eliminate macroeconomic fluctuations for the Turkish economy. Keywords: Macroeconomic policy, TVP-VAR, Bayesian VAR, GARCH Volatility, Turkey
Common Cycles in Commodity Prices
This study empirically investigates the short- and long-run co-movement among commodity prices using six commodity group price indices. The commodity group indices used in the study include foodstuffs, livestock and products, fats and oils, raw industrials, metals and textiles. The data for this study was sourced from Commodity Research Bureau (CRB); the frequency of the data is monthly and covers the period from 1951M1 to 2015M6. In order to investigate the short- and long-run co-movement properties of the commodity prices, the study employs the unit root tests, Granger causality test, Johansen cointegration test as well as common cyclical features test. The study reveals that all the variables are stationary in first differences with KPSS test, i.e., all the variables are integrated of same order, I (1). The Granger causality test shows that all variables have at least one unidirectional Granger causality. Johansen cointegration test suggests three cointegration vectors, thus implies long-run equilibrium relationship among the groups of commodity prices. The study shows two common cycles among the groups of six commodity price indices based on the common cyclical features test. The major implication from the findings of the study is that short- and long-run changes in the commodity prices of interest are driven by common factors and any observed change in price of one of the selected commodity prices implies that the other will also change both in the short- and long-run. Therefore, the history of one of the commodity prices can be utilized to make prediction for the others. Keywords: Common cycles, commodity prices, co-movement.
Income Distribution and the Business Cycle
This thesis consists of six chapters. The first chapter is devoted to the introduction to explore how the income distribution within the countries has become a prominent issue in policy making over time. In the second chapter, the related literature on income distribution, GDP and the relationship between these two variables is reviewed. The methodology used for dating the business cycles is extensively explained in the third chapter. The remaining chapters constitute three self-contained essays. The investigation of a possible relationship between the degree of income equality within the countries, and the severity of recession and expansion phase of business cycles, is examined using two different methods. To carry out the investigation reported in chapters four, five and six we use data collected for 40 years on Gini index values and the GDPs of 36 selected countries. The main goal in the first essay is to determine how the deepness and duration of cycles of GDP is correlated with the Gini index values of countries and whether this relationship is mainly sourced from consumption or investment. Likewise, an investigation is carried out to determine if the number of cycles in consumption, investment and GDP of countries could be associated with the level of income inequality in those countries. The results of the correlation and the t-test analysis indicates that income inequality leads to a deeper and longer decline of GDP, which causes a greater cumulative income loss of GDP during a recession period, and a somewhat faster speed of recovery during an expansion period. In addition, the result of a correlation between Gini index values and the number of cycles in consumption, investment and GDP indicate that income inequality is associated with a greater number of cycles in consumption and GDP and a lower number of cycles in investment. In the second essay, the relationship between income equality and the recession is theoretically examined. Models are presented to show how the movement of four components of GDP as consumption, investment, government spending and net export takes place during a recession period for the countries with different level of income distribution. This shows that the countries with a more equality of income distribution would experience a less costly recession. For empirical analysis the instrumental variable is employed in which the findings of empirical analysis support the theoretical arguments. In the third essay, an instrumental variable analysis is employed to find a possible relationship between income inequality and the intensity of expansionary phase of cycles. Although the signs of the coefficients indicate that a more equal income distribution is associated with a somewhat faster recovery, the results are not statistically significant. Keywords: Income Distribution, Business Cycle, Recession, Expansion, Instrumental Variable, Cumulative Loss and Amplitude
Environmental Effects of Fiscal Policy, Oil Production and Renewable Energy in the Presence of the Environmental Kuznets Curve
This thesis primarily aims at analyzing the environmental effects of fiscal policy, oil production and renewable energy consumption in the presence of the environmental Kuznets curve. To this end, this thesis is divided into three different sections. Firstly, the relationship between fiscal policy and CO2 emissions from different fuel sources is investigated. To ensure robust results, second generation time series econometric procedures which account for multiple structural breaks in the series are employed. The EKC hypothesis is valid in all the four models employed. Results from all four models show that fiscal policy has a positive and insignificant relationship, a negative and significant relationship, a positive and significant relationship and a negative and significant relationship with CO2 emissions from solid, liquid, gaseous and total sources respectively. Granger causality test with the Toda Yamamoto and Dolado Lutkepohl procedure validates the growth hypothesis for Thailand. Secondly, the environmental effect of oil production in 15 oil producing countries is investigated while controlling for the environmental Kuznets curve hypothesis. First and second generation panel econometric techniques validate the presence of cointegration in the adopted model. Estimation results imply a positive relationship between oil production and CO2 emissions which is robust across all mean based panel estimators. The environmental Kuznets curve hypothesis (EKC) is validated in two of the three specified mean based estimators. Quantile regression results show that the EKC hypothesis is significantly valid only at higher emission countries while oil production has a significant positive relationship with CO2 emissions only at lower emission countries. Lastly, the relationship between renewable energy consumption, energy prices and CO2 emissions is investigated for the group of seven (G7) economies. Panel and country specific cointegration tests validate the presence of cointegration for all countries and at the panel level. Estimation results show that renewable energy and energy prices both have negative relationships with CO2 emissions at the panel level. At country specific levels, energy price abates CO2 emissions in all the G7 countries. Only in the UK and Italy is there a significant and robust CO2 abatement effect of renewable energy consumption.