Sumru Altug

American University of Beirut | AUB · Department of Economics

The behavior of postwar real U.S. GNP, the inputs to an aggregate production function, and several formulations of the associated Solow residuals for the presence of nonlinearities in their generating mechanisms are examined. Three different statistical tests for nonlinearity are implemented: the McLeod-Li test, the BDS test, and the Hinich bicovar...

This article considers the sources of long-term economic growth for Turkey over the period 1880–2005. The period in question covers the decline and eventual dissolution of the former Ottoman Empire and the emergence of the new Turkish Republic in 1923. Hence, the article provides a unique look at the growth experience of these two different politic...

This introduction to general equilibrium modelling takes an integrated approach to the analysis of macroeconomics and finance. It provides students, practitioners, and policymakers with an easily accessible set of tools that can be used to analyze a wide range of economic phenomena. Key features: • Provides a consistent framework for understanding...

We examine the relationship between cyclical fluctuations and macroeconomic, institutional, and cultural indicators for 46 countries from Europe and the Mediterranean basin. In the Mediterranean cycles are different: the duration of expansions is shorter; the amplitude of recessions is larger; and cyclical synchronization is smaller than elsewhere....

In this paper, we construct a Twitter-based high-frequency Economic Policy Uncertainty (TEPU) index built on a select set of Twitter user accounts whose tweets are considered to reflect expert opinion on the topic. We study the relationship between the TEPU index and a set of key financial indicators for tracking financial developments in Turkey ov...

In this study, we examine the effects of uncertainty on investment decisions for the Russian economy. We employ an empirical specification where the dynamics of investment under uncertainty are captured by an error correction model of investment with partial irreversibility and expandability which allows for significant episodes of investment and d...

The coronavirus crisis that started in December 2019 was declared a pandemic by March 2020 and had devastating global consequences. The spread of the virus led to the implementation of different preventive measures prior to the availability of effective vaccines. While many governments implemented lockdowns to counter the pandemic, others did not l...

In this paper, we develop a Twitter-based measure of public sentiment that is useful for measuring the economic policy uncertainty that impacts individual decisions for Turkey. We extract a Twitter-based Economic Policy Uncertainty (TEPU) Index based on a selected set of Twitter user accounts whose tweets are considered to reflect expert opinion on...

We examine the role of spatial spillovers in economic growth for the Middle East and North Africa (MENA) region. We explicitly model spatial interactions that may arise from geography, bilateral trade, or institutional similarities, and ask how much they are likely to matter for growth externalities and spillover effects. We find that the economic...

In this paper, we propose a method for real‐time prediction of recessions using large sets of economic and financial variables with mixed frequencies. This method combines a dynamic factor model for the extraction of economic and financial conditions together with a tailored Markov regime switching specification for capturing their cyclical behavio...

In this paper, we examine the cyclical dynamics of a Real Business Cycle model with ambiguity averse consumers and investment irreversibility using the smooth ambiguity model of Klibanoff et al., 2005, Klibanoff et al., 2009. Ambiguity of belief about the productivity process arises as agents do not know the process driving variation in aggregate T...

In this paper, we examine the role of spillovers in economic growth for the Middle East and North Africa (MENA) region by accounting for spatial effects. Such spatial effects in growth for the MENA countries may arise on the basis of geography, bilateral trade or institutional similarities. We explicitly model such interactions using a spatial econ...

This chapter aims to examine the role that a key emerging economy, namely, China, plays in the global economy for the propagation of financial uncertainty and volatility. For this purpose, it seeks to measure the interdependence of real and financial markets for a key set of developed markets, namely, the US, the UK, Germany, and Japan, in relation...

This paper puts forward a unified framework for the joint estimation of the indexes that can broadly capture economic and financial conditions together with their cyclical regimes of recession and expansion. We do this by utilizing a dynamic factor model together with Markov regime switching dynamics of model parameters that specifically exploit th...

The Turkish macroeconomic experience since 2002 has been characterized by three striking trends: (1) an accelerated growth rate of income, (2) a sharp decline in the real interest rate, and (3) a sustained fall in the saving rate of different age-groups. During the same period, there has also been a significant increase in access to credit by Turkis...

The Turkish macroeconomic experience since 2002 has been characterized by three striking trends: (1) an accelerated growth rate of income, (2) a sharp decline in the real interest rate, and (3) a sustained fall in the saving rate of different age-groups. During the same period, there has also been a significant increase in access to credit by Turki...

This paper examines the role of the extensive and intensive margins of labor input in the context of a business cycle model with a financial friction. We document significant variation in the hours worked per worker for many emerging-market economies using manufacturing data. Both employment and hours worked per worker are positively correlated wit...

Presentation at SETA Panel moderated by Sadık Günay, with the participation of Prof. Elif Çepni and Dr. Nurullah Gür

In this paper, we formulate a statistical model of inflation that combines data on survey expectations with the inflation target set by central banks. Our model produces inflation forecasts that are aligned with survey expectations, thus integrating the predictive power of the survey expectations into the baseline model. Furthermore, we incorporate...

The global financial crisis of 2007-2008 has been termed as the most synchronized recession since the Great Depression in the 1930's. 1 In its aftermath, we are observing a multitude of changes in the global economy and global governance. For one, the G-20 forum comprising industrialized and emerging economies has acquired added importance in promo...

The transcript of a panel discussion marking three decades of the real business cycle approach to macroeconomic analysis as manifested in Kydland and Prescott's "Time to Build" (Econometrica, 1982) and Long and Plosser's "Real Business Cycles" (Journal of Political Economy, 1983). The panel consists of Edward Prescott, Finn Kydland, Charles Plosser...

In this paper, we formulate a statistical model of inflation that combines data on survey expectations and the inflation target set by central banks. Our model produces inflation forecasts that are aligned with survey expectations, thereby integrating the predictive power of the survey expectations into the baseline model. We further incorporate th...

This paper constructs coincident economic indicators (CEI) of real activity that takes into account the data characteristics for emerging economies. The CEI is derived as the common factor at the monthly interval in a dynamic factor framework that also allows for seasonal factors and uses economic series available at mixed frequencies and different...

In this paper, we formulate a statistical model of inflation that combines data on survey expectations with the inflation target set by central banks. Our model produces inflation forecasts that are aligned with survey expectations, thus integrating the predictive power of the survey expectations into the baseline model. Furthermore, we incorporate...

In this paper, we study the evolution of inflation expectations for two key emerging economies, Brazil and Turkey, using a reduced form model in a state-space framework, where the level of inflation is modeled explicitly. We match the survey-based inflation expectations and inflation targets set by the central banks of Brazil and Turkey with the pr...

The transcript of a panel discussion marking three decades of the real business cycle approach to macroeconomic analysis as manifested in Kydland and Prescott's “Time to Build” ( Econometrica , 1982) and Long and Plosser's “Real Business Cycles” ( Journal of Political Economy , 1983). The panel consists of Edward Prescott, Finn Kydland, Charles Plo...

We examine the relationship between institutions, culture and cyclical fluctuations for a sample of 45 European, Middle Eastern and North African countries. Better governance is associated with shorter and less severe contractions and milder expansions. Certain cultural traits, such as lack of acceptance of power distance and individualism, are als...

This paper investigates the relationship between the main features of business cycles and the institutional and structural characteristics of 62 industrial, emerging and formerly centrally planned economies from all continents. We find that a variety of institutional indicators, including stronger governance, greater civil liberties, more developed...

Presentation at Conference on Financial Literacy and Pension Awareness,

This paper characterizes business cycle phenomena in a sample of twenty-seven developed and emerging economies using a univariate Markov regime-switching approach. It examines the efficacy of this approach for detecting business cycle turning points and for identifying distinct economic regimes for each country in question. The paper also presents...

This paper characterizes the business cycle as a recurring Markov chain for a broad set of developed and developing countries. The objective is to understand differences in cyclical phenomena across a broad range of countries based on the behavior of two key economic times series – industrial production and employment. The Markov chain approach is...

This paper investigates the relationship between the main business cycles features and the institutional and structural characteristics of countries in which they are observed. Using the nonparametric Harding-Pagan approach, we derive the business cycle characteristics of 63 countries that includes industrial, emerging and formerly centrally planne...

This paper examines the role of the extensive and intensive margins of work in the context of business cycles in emerging markets with a financial friction. The earlier literature analyzed the role of search frictions with only an extensive margin of work and showed that such a framework can address the distinguishable business-cycle characteristic...

This paper develops a set of leading indicators of industrial production growth and consumer price inflation for the period 2001-2010. The choice of indicators is based on pseudo out-of-sample forecasting exercise implemented by Stock and Watson (2003), amongst others. We find that asset prices that reflect expectational factors or interest rates t...

This paper characterizes business cycle phenomena in a sample of 27 developed and developing economies using a univariate Markov regime switching approach. It examines the efficacy of this approach for detecting business cycle turning points and for identifying distinct economic regimes for each country in question. The paper also provides a compar...

Is çevrimlerinin tanim ve özelliklerinin arastirilmasi modern makroekonomi kuraminda önemli bir yer tutmaktadir. Bu çalismamizda Türkiye’de ve yükselen piyasa ekonomilerinde is çevrimlerinin gerek ampirik gerekse teorik yönden ele alip ilk olarak tarih ve süre araliklarinin belirlenmesi için kullanilan yöntemleri ve Türkiye açisindan uygulamalarini...

This book provides an overview of the modern theory and empirics of business cycles. Written by one of the pioneering authors in this field, it examines the notion of a business cycle and discusses alternative approaches to modeling. Arguably, one of the most important debates in this literature has been the issue of “matching” a business cycle to...

We examine the impact of random changes in investment tax credit (ITC) policy on the irreversible investment decisions of a monopolistically competitive firm facing demand uncertainty. We examine the impact of increases in risk and changes in persistence in the ITC policy on investment behavior. Our results indicate that a temporary ITC (lower poli...

Is çevrimlerinin tanim ve özelliklerinin arastirilmasi modern makroekonomi kuraminda önemli bir yer tutmaktadir. Bu çalismamizda Türkiye’de ve yükselen piyasa ekonomilerinde is çevrimlerinin gerek ampirik gerekse teorik yönden ele alip ilk olarak tarih ve süre araliklarinin belirlenmesi için kullanilan yöntemleri ve Türkiye açisindan uygulamalarini...

The objective of this article is two-fold. First, we develop a theoretical model to investigate the impact of political risk on irreversible investment. Second, we apply our model to an analysis of the effects of risk of separation of the province of Quebec from the Canadian federation. We model the probability of a regime switch using the properti...

The literature on the effects of changes in tax policy on investment behavior has typically abstracted from the role of learning. In this paper, we consider the implications of subjective uncertainty and the firm's ability to learn about the permanent component in the stochastic tax wedge determining the firm's after-tax costs of investing. We exam...

This article considers the sources of long-term economic growth for Turkey over the period 1880–2005. The period in question covers the decline and eventual dissolution of the former Ottoman Empire and the emergence of the new Turkish Republic in 1923. Hence, the article provides a unique look at the growth experience of these two different politic...

We examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We examine price-setting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems a...

We examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We examine price-setting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems a...

Including contributions from noted international scholars, this collection of papers provides a strong theoretical and empirical underpinning for the discussion of major public policy issues facing Turkey today. Matters addressed include: determinants of growth and productivity education and human capital accumulation income inequality corporate c...

This paper examines the behavior of postwar real U.S. GNP, the inputs to an aggregate production function, and the associated Solow residuals for the presence of nonlinearities in their generating mechanisms. To test for nonlinearity, we implement three dierent statistical tests: the McLeod-Li test based on the correlogram of the squared data, the...

In this Paper, we examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We show that such features may lead to strategic considerations in the loan extension decision and in the pricing of loan contracts. We consider both lending and under-le...

Dynamic stochastic general equilibrium (DSGE) models have begun to dominate the field of macroeconomic theory and policy-making. These models describe the evolution of macroeconomic activity as a recursive sequence of outcomes based on the optimal decision rules of rational households, firms and policy-makers. While posing a micro-founded dynamic o...

This paper presents estimates of the degree of returns to scale using nonparametric measures of primal and dual productivity for 2-digit US manufacturing industries. As part of the analysis, the cyclical behaviour of primal and dual productivity measures are considered, time-varying markups are allowed for, and the small sample properties of the in...

A sovereign borrower seeks to raise funds internationally to finance a fixed-size project, which no single lender can finance alone. Lenders cannot lend more than their endowments, which are private information. A coordination failure arises; therefore, some socially desirable projects may not be financed, even if ex post feasible. There are multip...

There is evidence that tax rates have varied considerably through time. In the postwar years changes in business taxation in the US have occurred at a pace of approximately every three years. The purpose of this paper is to examine the implications of tax uncertaintyforinvestment. Investment decisions are, at least largely, irreversible and therefo...

There is evidence that tax rates have varied considerably through time. In the postwar years, changes in business taxation in the U.S. have occurred at a pace of approximately every three years. The purpose of this research is to examine the implications of tax risk and persistence on irreversible investment decisions.

A sovereign borrower seeks to raise funds internationally to finance a fixed-size project, which no single lender can finance alone. Lenders cannot lend more than their endowments, which are private information. A coordination failure arises therefore, some socially desirable projects may not be financed, even if ex post feasible. There are multipl...

Political risk is widely present in developing but also in developed countries, and stems from a variety of sources. The objective of this paper is twofold. First, we develop a theoretical model to investigate the impact of political risk on irreversible investment. Second, we apply our model to an analysis of the risk of separation of the province...

This paper estimates the degree of the returns to scale for 2-digit U.S. manufacturing industries from the output-based primal and price-based dual equations implied by firms' cost-minimization problems. It seeks to reconcile the cyclical behavior of the primal and dual productivity residuals by allowing for nonconstant returns to scale and imperfe...

The behavior of postwar real U.S. GNP, the inputs to anaggregate production function, and several formulations of the associated Solowresiduals for the presence of nonlinearities in their generating mechanisms are examined. Three different statistical tests for nonlinearity are implemented: the McLeod-Li test, the BDS test, and the Hinich bicovaria...

We examine the impact of learning about the unknown costs of investment on irreversible investment decisions, and show that the presence of learning increases the endogenous cost of adjustment and depresses investment. We demonstrate convergence of the state of information and capital stock to the ergodic set. Once learning is complete, in contrast...

This paper develops and implements a semiparametric estimator for investigating, with panel data, the importance of human capital and time nonseparable preferences to females when aggregate shocks are present. It provides a set of conditions for making statistical inferences about agents' expectations of their correlated future choices, from a shor...

We examine Italian inflation rates and the Phillips curve with a very long-run perspective, one that covers the entire existence of the Italian lira from political unification (1861) to Italy's entry in the European Monetary Union (end of 1998). We first study the volatility, persistence and stationarity of the Italian inflation rate over the long...

This paper characterizes the behavior of investment expenditures, optimal capital stocks, and real interest rates in the time-to-build model of investment. The paper derives equilibrium pricing relationships involving the prices of new and used capital and uses these relationships to obtain simple tests of the underlying investment technology. The...

We consider a price-setting game in which a dominant informed trader sets price, taking into account the reactions of uninformed traders who behave competitively. We show that there are conditions under which the dominant informed trader may prefer to behave competitively, and we also prove a no-trade result.

This paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply. It exploits a simple factor structure, rationalized by two assumptions, that household allocations are Pareto optimal and that the labor market is competitive. The paper estimates household preferences, and tests how well this parsim...

This paper analyses how the wage and employment decisions of females are affected by past workforce participation and hours supplied. Our estimation methods exploit the fact that, when markets are complete, the Lagrange multiplier for an agent’s lifetime budget constraint always enters multiplicatively with the prices of (contingent claims to) cons...

This paper presents maximum likelihood estimates and tests of a model similar to one Kydland and Prescott (1982) suggested. For this purpose, it derives equilibrium laws of motion for a set of aggregate variables as functions of the model's parameters and the innovation to the technology shock. The paper shows that a single unobservable index can e...

This paper develops a two-sector discrete-time general-equilibrium model of a production economy with irreversible investment, extended for Q-theory of investment. It investigates effects of irreversibility on asset prices and predicts that when real investment is restricted to be positive, irreversibility has an increasing effect on the conditiona...