Testing PPP hypothesis under temporary structural breaks and asymmetric dynamic adjustments

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

“…A probable caveat of our analysis is the possibility of a structural break in the data due to the changing business dynamics from Covid-19. The studies like ( Naeem, Tiwari, Mubashra, & Shahbaz, 2019 ; Nasir, Al-Emadi, Shahbaz, & Hammoudeh, 2019 ; Omay, Shahbaz, & Hasanov, 2020 ; Shahbaz, Rehman, & Afza, 2016 ; Solarin, Shahbaz, & Stewart, 2018 ) and ( Shahbaz, Tahir, Ali, & Rehman, 2014 ) have extensively documented the role of structural stability in model estimation during changing business cycles. The limitation of this study to apply a comprehensive structural break analysis is the post Covid-19 firm-level data, which is only available for two quarters (till end June 2020).…”

“…The limitation of this study to apply a comprehensive structural break analysis is the post Covid-19 firm-level data, which is only available for two quarters (till end June 2020). However, to ensure the robustness of this preliminary assessment, we follow the methodology of ( Emirmahmutoglu, Gupta, Miller, & Omay, 2020 ) and ( Omay et al, 2020 ) to test for stationarity in our estimates. This approach builds on ( Ucar & Omay, 2009 ) and ( Emirmahmutoglu & Omay, 2014 ).…”

Smooth Break Detection and De-Trending in Unit Root Testing

“…Theoretical articles that have recently focused on the problems we have obtained from power analysis can be found in [21][22][23][24][25][26][27][28]. In these studies, the authors propose theoretical approaches that try to solve the problems we mentioned in the power study of the Fourier and logistic smooth transition function.…”

Empirical Investigation of Long Run PPP Hypothesis: The Case of Temporary Structural Break and Asymmetric Adjustment

“…On the other hand, Sollis (2004), Christopoulos and Leon-Ledesma (2010) and Omay et al (2018) argue that the exact behavior of real exchange rate may well be described by nonlinear adjustments towards equilibrium after allowing for structural breaks. In fact, Sollis (2004), Telatar and Hasanov (2009), Christopoulos and León-Ledesma (2010), Kutan and Zhou (2017), Omay et al (2018), Omay et al (2020), among others, provide more evidence on empirical validity of the PPP hypothesis after allowing for simultaneous structural breaks and nonlinear adjustments towards the equilibrium.…”

“…In this paper we examine the empirical validity of the PPP hypothesis by employing novel unit root test procedures proposed by Christopoulos and Leon-Ledesma (2010) and Omay et al (2020). These test procedures allow for rather rich dynamics of real exchange rate series consistent with both empirical observations and theoretical models.…”