Dept. of Economics - Ph.D. / Sc.D.

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Open Access
Three essays on the effects of education policies on education and labor market outcomes in Turkey
(Bilkent University, 2022-09) Demirel, Merve
This thesis consists of three essays on the effects of two education policies on education and labor market outcomes in Turkey. The first essay examines the causal effects of the drastic expansion in Turkish higher education, which occurred in 2006-2008 with the establishment of new universities and increasing the educational opportunities both in the new and established universities, on the educational attainment disadvantage of women in higher education. The expansion increases the attainment rates of both genders but does not significantly reduce the gender gap after controlling for the time trends. Studying the mechanisms shows that the expansion in social sciences, which constitutes more than half of the additional slots, benefited men and women evenly; but the expansion in engineering, about 25% of additional slots, benefited men more. The second essay investigates the causal impact of the same expansion policy in higher education on college wage premium in Turkey. The expansion increases the share of college graduates significantly and decreases the college wage premium for young men exposed to the policy. The expansion has lower but significant adverse effects on older age groups, whose human capital accumulation is not affected by the expansion policy. This result provides causal evidence that the increase in the supply of skilled workers reduces the wage advantages enjoyed by these workers. The third essay analyzes the impact of extending mandatory years of schooling from 5 to 8 years in 1997 on the gender gap in intergenerational educational persistence. Prior to the reform, there was a gender gap in the association of parents’ educational attainment with their offspring’s. Daughters’ educational attainment is more dependent on their parents’ educational background. The education reform reduces the impact of parental education on the completion of new compulsory schooling (8 years) and post-compulsory schooling (high school) for both sons and daughters. The gender gap in intergenerational education transmission decreases in the completion of new compulsory schooling level but remains unchanged at the post-compulsory schooling level after the reform.
Open Access
Nonlinearities in macroeconomic policy
(Bilkent University, 2022-08) Akbal, Ömer Faruk
This thesis consists of four essays on nonlinear approaches in macroeconomic modeling. The ﬁrst essay analyzes a structural vector autoregressive model to assess the contribution of inﬂation targeting monetary policy to economic stability. This study is conducted with the data of New Zealand, which was the ﬁrst country to oﬃcially adopt inﬂation targeting. It is shown that the inﬂation targeting policy contributed to the overall macroeconomics stabil-ity. In the second essay, the expectation-maximization (EM) method, which is adapted to regime-switching settings, is derived. In the third essay, the perfor-mance of the EM method is tested by replicating well-known examples from the literature on regime-switching models. The method is shown to provide a good trade-oﬀ between accuracy and speed for a setting involving large data sets available in mixed frequencies. In the fourth essay, the performance of the EM method is tested using real-time US data. Here, a linear nowcast-ing model is used as a benchmark and compared to a modiﬁed framework involving regime-switching. The nowcasting performance of both models, the benchmark and regime-switching, between 2007 and 2022 is evaluated. The regime-switching model is shown to outperform the linear model in terms of short-term prediction performance, especially during the COVID-19 pandemic.
Open Access
Essays on the effects of compulsory schooling: education, labor market, and time use outcomes
(Bilkent University, 2021-08) Akar, Betül
This thesis consists of four essays on the effects of the compulsory schooling reform, which extends the mandatory years of schooling from five to eight years in 1997 in Turkey. The first essay utilizes the exogenous education reform as an instrument for the educational attainment to investigate the causal effects of education on voluntary work. The reform increases the education levels of individuals significantly, and increased education of compliers has a negative but insignificant causal impact on the probability and hours of voluntary work for men. The second essay investigates the impact of increased education, due to the exogenous education reform which extended mandatory secular education by three years, on time spent in religious activities. For women, increased education has a negative causal impact on the allocation of time to religious activities; however, for males, there are no significant effects of education on time spent in religious activities. The third essay examines the impact of the extension of mandatory education on mothers’ time spent in early childhood care. The compulsory education reform increases mothers’ completion of at least compulsory years of schooling. However, it has no significant effect on the primary components of early childhood education, namely time spent in reading to children, playing with children, and talking to children. The forth essay investigates the impact of the reform on the ethnic gap in educational and labor market outcomes between two ethnic groups in Turkey. For females, the reform widens the ethnic gap in the educational outcomes but has no impact on the ethnic gap in the labor market outcomes. On the other hand, for males, it has no impact on the ethnic disparities in the educational attainment but widens the disparities in the labor market outcomes.
Open Access
Explorations to refine Aizerman Malishevski's representation for path independent choice rules
(Bilkent University, 2020-09) Doğan, Serhat
This dissertation consists of four main parts in which we explore Aizerman Malishevski's representation result for path independent choice rules. Each path independent choice rule is known to have a maximizer-collecting (MC) representation: There exists a set of priority orderings such that the choice from each choice set is the union of the priority orderings' maximizers (Aizerman and Malishevski, 1981). In the first part, we introduce the maximal and prime sets to characterize all possible MC representations and show that the size of the largest anti-chain of primes determines its smallest size MC representation. In the second part, we focus on q-acceptant and path independent choice rules. We introduce prime atoms and prove that the number of prime atoms determines the smallest size MC representation. We show that q-responsive choice rules require the maximal number of priority orderings in their smallest size MC representations among all q-acceptant and path independent choice rules. In the third part, we aim to generalize q-responsive choice rules and introduce responsiveness as a choice axiom. In order to provide a new representation for responsive and path independent choice rules we introduce weighted responsive choice rules. Then, we show that all responsive and path independent choice rules are weighted responsive choice rules with an additional regularity condition. In the final part we focus on assignment problem. In this problem Probabilistic Serial assignment is always sd-efficient and sd-envy-free. We provide a sufficient and almost necessary condition for uniqueness of sd-efficient and sd-envy-free assignment via a connectedness condition over preference profile.
Open Access
Essays on status seeking, bequests and inequality
(Bilkent University, 2019-09) Harmankaya, Mehmet Fatih
Social status is the motivating force that governs the behavior of individuals. The tendency to desire higher social status affects household decision making activities. The quest for social status is mostly associated with reference dependent preferences related to economic decisions. This dissertation is made up of three essays on reference dependent preferences related to bequests and inequality. In this scope, this study presents a theoretic framework to analyze the effects of reference dependent preferences on the economy. Thefirst essay analyzes the effects of status quest on bequest distribution and household inequality. Focusing on the relative wealth dimension of social status, we develop a two-period overlapping generations model with heterogeneous agents. It is found that, the quest for social status modi es lifetime decisions and as a consequence, the trajectory of the overall economy. We show that, the bequest motive and the concern for social status not only increase the stationary level of capital, but also enhance the household equality. In the second essay, the implications of assuming different production function for thefinal good is studied in an overlapping generations economy model. In this analysis, social status is identi ed with relative transmissible wealth or bequest. In the long run, the social status concern increase the stationary level of capital. Moreover, inequality in a segregated economy made up of two groups which notably differ in their social status referent, is analyzed. It is shown numerically that, even when the only transmissible factor is wealth, group inequality persists in time. It is found that inequality can decrease in the long-term as long as the poorer group refers the richer group strongly enough. In the third essay, we analyze the role of consumption envy on the resource distribution and household inequality. To do this, a non-overlapping generations renewable resource model is developed. Long run dynamics of the total renewable resource in the economy are analyzed, considering both linear and concave production functions. For the case of linear production function, the fraction of resources devoted to consumption is shown to increase with consumption envy. Thus, steady state level of the available resource in the economy decreases with the effect of consumption envy. Moreover, consumption envy is proven to increase the inequality between households in terms of wealth, consumption and renewable resources.
Open Access
Essays on network theory and applications
(Bilkent University, 2019-01) ikizler, Hüseyin
This thesis consists of three essays centering on network theory. In the first essay, we use a network model to show how homophily, conjoined with conformity, may shape political divisions along ethnic lines in multi-ethnic societies. We find that the decisive factor is not simply the degree of homophily but the presence of monotone agents, who are only connected with their own types. When there is no monotone agent, even if the level of homophily is unbounded, ethnic divisions can be avoided. The presence of a few monotone agents necessarily divides a sparsely integrated society along ethnic lines. The second essay examines both theoretically and empirically (strong) Nash equilibrium of the free labor mobility network formation game. First, we design a network formation game in which each country's action is a choice of a mobility network between a subset of countries. The utility of each country is determined by a country specific threshold level of absorption ratio and net labor ows. We theoretically characterize all stable and optimal mobility networks under speci fic assumptions. In our empirical analysis, we focus on EU and EFTA member countries. We observe that some specific countries incur the maximum loss in the grand mobility network according to our model. These countries turnout to be the ones in which reintroduction of quotas on migration is approved via referendum. In the third essay, we examine a normal form game of network formation due to Myerson (1991). All players simultaneously announce the links they wish to form. A link is created if and only if there is mutual consent for its formation. The empty network is always a Nash equilibrium of this game. We define a refinement of Nash equilibria that we call trial perfect. We show that the set of networks which can be supported by a pure strategy trial perfect equilibrium coincides with the set of pairwise-Nash equilibrium networks, for games with link-responsive payoff functions.
Open Access
Essays on unit root tests in time series
(Bilkent University, 2018-12) Göğebakan, Kemal Çağlar
This dissertation consists of three essays which develop new unit root testing methods in time series. First one is about the effect of the persistent volatility breaks, i.e. non-stationary volatility, on the unit root inference in regulated time series. In this essay, we show that conventional bounded unit root tests become potentially unreliable in the presence of the non-stationary volatility. Then, as a remedy, we propose a new class of unit root tests that are robust to both the range constraints and the permanent volatility shifts present in the time series. While developing our new tests, we also extend the asymptotic theory for integrated time series. The second essay is about testing for seasonal unit roots. In this essay, we first construct a family of nonparametric seasonal unit root tests by utilizing fractional integration operator. Different from the wellknown parametric seasonal unit root tests, the proposed tests are free from tuning parameters. Another contribution of this essay is on the fractional integration literature. We introduce a new fractionally transformed seasonal series. The third essay deals with the effect of the heteroscedastic innovations on the nonparametric seasonal unit root tests. We demonstrate that these tests spuriously reject the true seasonal unit root null hypothesis under the heteroscedasticity. To remove the aforementioned size distortions, we develop nonparametric wild bootstrap seasonal unit root tests. These tests are successful in correcting size problems under a broad class of heteroscedasticity observed in the seasonal time series. Moreover, we show that the proposed tests are asymptotically pivotal.
Open Access
Essays on macroeconomics
(Bilkent University, 2018-09) Taş, Mustafa Anıl
This dissertation consists of three essays on macroeconomics. The first essay models the term structure of interest rates in an international framework from a macro-finance perspective. Other essays focus on the Turkish economy. The second essay measures the potential growth rate of the Turkish economy. Finally, the third essay examines the stance of monetary policy in Turkey in the post-2001 period. In the first chapter, I develop a two-country ane term structure model that accounts for the interactions between the macroeconomic and financial variables of each country. The model features a structural preference side and reduced form macroeconomic dynamics. The economies are connected through covered interest parity. Using this framework, I provide an empirical application of the model using data from the United States and the United Kingdom. I quantify the extent to which economic dynamics in one country explain the other’s nominal term structure. I find that the variation in the bond yields in each country is explained mostly by domestic factors. The cross-country effects are more prominent in pricing of the U.S. bonds. In the second chapter, I estimate the potential growth rate of the Turkish economy using a bivariate filter. I define the potential growth as the output growth rate at which selected macroeconomic imbalance indicators do not diverge from their targets. This definition of the potential growth implies results that are substantially different than those suggested by the Hodrick-Prescott filter. I find that these imbalance indicators would not have deteriorated, had Turkey grown at much lower rates particularly after the Great Recession. I also find that for the last five years, Turkey’s potential growth rate is 3 percentage points below the trend growth rate on average. Finally, the results of this study are consistent with the growth target published in the recently announced economic plan of Turkey. The third chapter is a joint work with Refet Gürkaynak, Zeynep Kantur and Se¸cil Yıldırım-Karaman. In this chapter, we present an accessible narrative of the Turkish economy since its great 2001 crisis. We broadly survey economic developments and pay particular attention to monetary policy. The data suggests that the Central Bank of Turkey was a strong inflation targeter early in this period but began to pay less attention to inflation after 2009. Loss of the strong nominal anchor is visible in the break we estimate in Taylor-type rules as well as in asset prices. We also argue that recent discrete jumps in Turkish asset prices, especially the exchange value of the lira, are due more to domestic factors. In the post-2009 period the Central Bank was able to stabilize expectations and asset prices when it chose to do so, but this was the exception rather than the rule.
Open Access
Analysis of cooperative behavior when utility is semi-transferable
(Bilkent University, 2018-05) Dede, Yasemin
The primary purpose of this study is to analyze both cooperative and nonco- operative games under semitransferable utility. In game theory literature, utility seems so far to have been assumed not to be transferable at all in noncoopera- tive games, while both fully transferable and nontransferable utility are con- sidered in the context of cooperative games. There are, however, an abundance of real life situations, where utility is partially transferable. Here we introduce the notion of semitransferable utility, which encompasses full-transferability and nontransferability as its two extreme special subcases. We explore and exem- plify what changes some well-known equilibrium notions undergo when one allows utility to be only partially transferable. In particular, we relate core allocations in a convex cooperative transferable utility (TU) game to their counterparts in a corresponding strategic context, to show that, for each core allocation of a given TU game, there is a strategic form game, where that allocation survives, while almost all other allocations are eliminated.
Open Access
Essays on bargaining theory
(Bilkent University, 2018-05) Özcan Tok, Elif
Bargaining refers to a situation where two or more agents try to decide over how to divide a surplus generated by the economic transactions among these agents. There are two major approaches to bargaining problems: cooperative and non-cooperative approach. The former one focuses on the axioms that a bargaining outcome should satisfy and it is initiated by Nash (1950). The latter one attempts to specify the bargaining procedure and it is pioneered by Stahl (1972) and Rubinstein (1982). This dissertation consists of five essays. The first three essays employ the non-cooperative bargaining approach; the remaining ones employ the cooperative bargaining approach. In the first essay, we study an infinite horizon bargaining game on a network, where the network is endogenously formed. Two specifications of the cost structure regarding the link formation is investigated: zero cost and non-zero cost. The equilibrium of the game is obtained for both specifications. Lastly, we focus on efficiency issue and characterize the efficient networks. In the second essay, an infinite horizon bargaining game between buyers and sellers on a two-sided supply chain network is analyzed where the valuations of the buyers are heterogeneous. We prove that the valuations of the buyers and the network structure have an impact on the equilibrium outcome. In the third essay, we investigate the emergence of reference points in a two-player, infinite horizon, alternating offers bargaining game. The preferences of players preferences exhibit reference-dependence, and their current offers have the potential to in uence future reference points of each other. However, this in uence is limited in that it expires in a finite number of periods. We describe a subgame perfect equilibrium that involves an immediate agreement. We study the in uence of expiration length and reference points on equilibrium strategies and outcomes. In the fourth essay, we study the salience of the reference points in determining the anchors and aspirations in a bargaining problem by introducing two parameters which capture these effects. In the cooperative bargaining literature, the disagreement point or the reference point is employed as an anchor while the ideal (or utopia) point or the tempered aspirations point as an aspiration. In this essay, a bargaining problem with a reference point is studied incorporating these two parameters and hence a family of bargaining solutions is obtained. Consequently, several characterizations for each individual member of this family is proposed. In the fifth essay, we introduce the iterated egalitarian compromise solution for two-person bargaining problems. It is defined by using two well-known solutions to bargaining problems, the egalitarian solution and the equal-loss solution, in an iterative fashion. While neither of these two solutions satisfy midpoint domination {an appealing normative property{ we show that the iterated egalitarian compromise solution does so. To sum up, this dissertation contributes to the diversified fields and practices of bargaining theory.
Open Access
Essays on macroeconomics
(Bilkent University, 2018-05) Karasoy Can, Hatice Gökçe
This dissertation consists of four essays on macroeconomics with a special emphasis on monetary economics and corporate finance. It presents empirical evidence for the floating rate channel in monetary policy transmission, highlighting the role of debt maturity when measuring cash flow exposure and its association with future path of policy. It then builds a theoretical model with New Keynesian properties in which endogenous borrowing constraints are source of amplification of fundamental shocks. The two blocks of the thesis, both empirical and theoretical essays, uncover the floating rate channel of monetary policy, with a comprehensive understanding and interpretation of corporate debt maturity, nature of repayment structure and forward guidance. The first essay investigates firm level stock price changes around monetary policy announcements in an event study framework, and finds that firms that have issued more floating rate debt see their stock prices affected more. Importantly, it shows that debt maturity is a crucial component of cash flow exposure. The firms with floating rate liabilities at longer maturities experience steeper fall in their stock prices. In addition to this, it provides further evidence regarding the floating rate channel by demonstrating that for the firms which hedge themselves against interest rate risk, the effect of the policy shock is mitigated. This indicates financial market sophistication, which is further explored in the form of statistical tests. Further, it is the path, or forward guidance component of monetary policy shock that triggers this channel since this is the aspect of the policy that shapes expectations about future short rates hence future floating rate debt payments. The results show that, in the zero lower bound period the floating rate channel continued to be effective because of forward guidance surprises. It is shown that this effect is not a result of rule of thumb behavior, and that the marginal stock market participant actually studies and correctly interprets the liability side of firm balance sheets. The tests of financial market sophistication, which are novel, contribute to the empirics of market rationality. Furthermore, the floating rate exposure at the time of monetary policy surprises predicts future investment and profitability, verifying the pricing decision and also providing evidence of another channel for monetary policy, due to financial effects. In short, this essay provides a detailed analysis of neo-classical monetary policy transmission involving firm balance sheets and provides a small glimpse of what lies behind Bernanke and Gertler’s (1995) “black box”. The second essay provides additional robustness checks and considers alternative regression model specifications to those in the first essay. This essay discusses the existence of floating rate channel for samples of different firm size classes, and for samples including or excluding specific sub-sectors. It shows that for small-sized firms, the channel is not evident, presumably resulting from the fact that their access to floating rate debt market is limited. This warrants further analysis, which will be taken up in the future. It confirms the cash flow effect and the protective power of hedging increases when the analysis excludes both financials and utilities sectors. Furthermore, it analyzes various specifications with additional control variables, time fixed effects, and provides further evidence for the zero lower bound period. The third essay builds a simple model in which both short term and long term debt co-exist. The essay is motivated by empirical papers which show that firms match their debt maturity structure and asset maturity. The model assumes that the sector which has long-lived capital is financed by long term debt, and the sector which has short-lived capital is financed by short term debt. The simple model provides an environment to discuss the sector-specific effects of the aggregate shocks and macro-prudential policies. In the second part of the essay, the simple real model is extended to a New Keynesian dynamic stochastic general equilibrium model which embeds nominal frictions due to price stickiness, which creates a role for monetary policy. The extended model has various policy implications. The impulse response functions to a similar monetary policy shock show that floating rate debt might be more disruptive for consumption. Moreover monetary policy is less effective in the floating rate case. These are in accordance with the findings of floating rate debt literature. Moreover it shows that lengthening the maturity of floating rate debt puts long term debt financed entrepreneurs into a more vulnerable position. This supports empirical findings in the first and second essay. The specific type of corporate debt that is used to finance investment, which eventually turns into production, plays a significant role in determining future cash flows, and that in turn is quite important for understanding monetary policy transmission. The fourth essay, which is the final essay of the thesis, is included to fulfill the publication requirement. It assesses empirically whether consumer confidence indices contain information about future private consumption growth in Turkey. To this end, empirical models for quarterly total, durable and nondurable consumption growth with and without sentiment indicators are presented, and in-sample forecasts and one-step-ahead out-of-sample forecasts from recursive OLS estimates are evaluated. It is demonstrated that consumer confidence indices are informative about consumption, however once other macro economic variables (e.g., exchange rate, labor income, real interest rate etc.) are included, gains from them in out-of-sample forecasts decrease significantly. Moreover there is no clear evidence for either precautionary savings motive or permanent income hypothesis.
Open Access
Essays on macroeconomics
(Bilkent University, 2017-09) Özcan, Gülserim
This dissertation consists of four essays on macroeconomics with a special focus on monetary economics, and shows the rationale behind non-optimality of expectation formation both empirically and theoretically. The first essay is empirical, and studies the role of inflation experience in the formation of inflation expectations in the euro area by investigating whether and to what extent inflation expectations of different forecasters are affected by the inflation they observe in the area they are residing in. We exploit the fact that many forecasters provide forecasts of the euro area inflation and these forecasters are in different firms, located in different countries. Hence there is a spatial dimension in the inflation experience of the forecasters. In particular, we first focus on the expectations of professional forecasters from different countries and ask whether their forecast errors are correlated with the observed inflation in the forecaster’s country at the time the expectation was formed. We find that current home inflation unduly affects expectations of next year’s euro area inflation, which may be because forecasters think euro area is more like their own country than it actually is (spatial) and/or think inflation is more strongly auto correlated everywhere than it actually is (temporal). We devise tests to decompose this effect into i) spatial error and ii) temporal error. We provide evidence showing that the source of this error is exclusively the temporal dimension. Forecasters perceive the world to be more serially correlated than it actually is for their home country, and for other countries as well which results in more pronounced and forecastable forecast errors. They understand the spatial dimension of inflation correctly. The second essay analyzes whether and how model uncertainty affects the amplification mechanism of the New Keynesian models. A first finding on a benchmark New Keynesian model with staggered price setting is that a robust optimal commitment policy necessitates more aggressive policy under a demand shock. Further, bringing additional persistence into the model deteriorates the effectiveness of monetary policy. Hence, allowing for either habit formation or partial indexation of prices to lagged inflation rate requires a stronger response for the policy to a demand shock. Together with the specification doubts, in order to reassure the private sector and signal that it will stabilize the fluctuations in the output gap, the policymaker reacts more aggressively as persistence rises. Although inflation persistence does not change the impact of model uncertainty, habit formation in consumption eliminates -even reverses- the impact of uncertainty on the policy reaction to a supply shock. The policymaker always attributes less importance to nominal interest rate inertia when there are concerns about model uncertainty. The third essay analyzes how the optimal behavior of a central bank changes if the central bank has a concern for robustness regarding model uncertainty when there is a possibility of a regime switch in the economy in which the transmission mechanism of monetary policy weakens. The aim is to stress the expectational effects arising from the regime-switching structure. The framework allows identifying the contribution of time-varying doubts about model misspesification on top of the risk of a future weakening of the policy transmission. The result implies a more active policy stance to reduce the possibility to experience a deterioration of monetary transmission mechanism even in normal times. The fourth essay takes a different turn and measures the monetary policy transmission mechanism in Turkey. Quantifying the impact of policy decisions on financial markets is complicated because of the simultaneous response of policy actions to the asset prices, and possible omitted variables that both variables respond to. This chapter applies a heteroscedasticity-based generalized method of moments (GMM) technique for financial markets in Turkey to overcome these problems. This approach is based on the heteroscedasticity of the policy surprises on monetary policy committee meeting dates to identify the financial market reaction to monetary policy. The findings are used as a cross-check for the widely-used identification technique, namely the OLSbased event study. The results suggest that event study estimates are biased for some asset returns.
Open Access
Essays on growth and macroeconomic dynamics
(Bilkent University, 2015-09) Özer, Mehmet
This dissertation is composed of four essays on economic growth and macro- economic dynamics. The first essay analyzes how the dynamic strategic in- teractions among agents a¤ect the long-run distribution of wealth in terms of catching up and the transitional dynamics. It is shown that incorporating the strategic behavior among agents leads to the wealth level of the initially poor and the rich households to be the same at the stationary state. Extending the model by incorporating relative wealth concern; the resulting equilibria depends the valuation of relative wealth concern by each individual and it is proved that under some plausible conditions the catching up occurs thanks to the strategic interaction in the form of open-loop. The stability of these two models are carried out for arbitrary number of people in the economy. In the second essay studies the e¤ects of above mentioned strategic interac- tion in Ramsey model with "Easterlin hypothesis". It is shown that strategic interaction among agents in the economy leads to a change not only in the distribution of wealth but also in the transitional dynamics substantially. The obtained complex dynamics is in the form of Hopf bifurcation which is one of the main tool to explain the economic fluctuations. Third essay of this thesis introduces Stone-Geary Preferences with an endoge- nous reference level of consumption in an Ak model in which reference level of consumption is an increasing function of the capital. It is shown that the result- ing equilibrium presents richer dynamics under such a Stone-Geary preferences. It is proved that endogenous reference level leads to global and local indetermi- nacy: economies starting with di¤erent initial conditions does not necessarily converge to the same steady state and also economies starting with the same initial conditions does not necessarily follow the same transition path. The aim of the fourth essay is to analyze the e¤ects of a pure public good that reduces the subsistence level of consumption on the long run equilibrium and the optimal tax rate. It is shown that although the steady state amount of public good is higher for the first best allocation, the subsistence level of consumption is the same with that of the second best equilibrium. On the other hand, the capital stock and the consumption of the private good are higher for the first best equilibria. Another important result of the essay is the "government revenue-tax rate" locus with a dynamic threshold which depends on the total factor productivity (TFP). The optimal amount of tax rate that maximizes the revenue of the government is an increasing function of the TFP and thus revenue maximizing tax rate varies across countries.
Open Access
Essays on uncertainty
(Bilkent University, 2015) Karaman, Seçil Yıldırım
This dissertation consists of three essays on the real impacts of uncertainty shocks. The first essay develops a theoretical model to investigate the impact of financial market uncertainty on real economic downturns. The second and third essays empirically investigate the differences in the adverse impact of uncertainty shocks on real output for countries with different financial development levels and central bank characteristics. The first essay investigates whether financial market volatility induces real downturns in a dynamic stochastic general equilibrium framework with heterogenous agents. In the model, an increase in the volatility of future stock price expectations of nonsophisticated agents causes an increase in the volatility of stock prices. In response to the increase in stock price volatility, the model generates reduction in consumption, investment, employment and output. The model contributes to the literature by modeling financial market volatility in a general equilibrium framework, highlighting the mechanisms through which the impact works, and providing estimates of its magnitude. The second essay investigates whether financial development moderates the negative impact of uncertainty shocks on real economic activity. To test this conjecture, I compare the impact of macro level uncertainty as measured by stock market volatility on real GDP growth for countries with different financial development levels. To address potential endogeneity concerns, the estimation is made using Two Stage Least Squares technique where plausibly exogenous disaster shocks are used as instruments for stock market volatility. The estimation results based on a panel data set of 54 countries between 1971 and 2009 are consistent with the conjecture that uncertainty shocks hurt countries with developed financial markets less. The third essay investigates the role of institutional characteristics of the central banks in moderating the negative consequences of uncertainty shocks using the same identification strategy as the second essay. The results provide strong evidence that central bank independence reduces the adverse effects of uncertainty shocks. As for the impact of central bank transparency, while in some specifications the results support its mitigating impact on the adverse effect of uncertanity, in others it doesn’t have a significant moderating impact. In the light of the restrictions on the transparency data set which spans 44 countries between 1998 and 2009, more comprehensive studies may be needed to reach a stronger verdict for its impact.
Open Access
3+1 Essays on the Turkish economy
(Bilkent University, 2005) Yücel, Mustafa Eray
This dissertation comprise of four essays. The first essay studies the relationship between treasury auction maturity and auction interest rates. Using the Turkish auction data from 1988 to 2004, a reciprocal linkage between auction interest rates and maturities is observed, especially for the 1995-2000 period. This suggests that under an adverse shock, treasury decreases the auction maturity in order not to increase interest rates too much. A change in this reciprocal relationship is also reported for the post-2001 era. The second essay assesses the effect of USD-Euro parity on a small open economy for an economy where its exports are predominantly denominated in Euros and imports are denominated in USD. The empirical evidence suggests that a positive innovation in USD-Euro parity appreciates the local currency, decreases inflation and increases output. The third essay studies the relationship between on-budget and off-budget expenditures in Turkey and concludes that information content of the budget deficit statistics is not empty; however, it might be misleading in assessing fiscal stance for Turkey. The final essay investigates the connection between Turkish industrial production performance and the success of a popular Turkish football team, namely Fenerbahce. The success of Fenerbahce is interpreted as a proxy for the workers' mood or morale. Performing a transfer function analysis on my monthly data set, I reveal a positive feedback from Fenerbahce's success, which proxies workers' mood/morale, to economic performance. Evidence of the effects of games against domestic rivals on industrial performance is not statistically significant.
Open Access
Quality and production control with opportunities and exogenous random shocks
(Bilkent University, 2005) Toy, Ayhan Özgür
In a production process, opportunities arise due to exogenous or indigenous factors, for cost reduction. In this dissertation, we consider such opportunities in quality control chart design and production planning for the lot sizing problem. In the first part of the dissertation, we study the economic design of X control charts for a single machine facing exogenous random shocks, which create opportunities for inspection and repair at reduced cost. We develop the expected cycle cost and expected operating time functions, and invoking the renewal reward theorem, we derive the objective function to obtain the optimum values for the control chart design parameters. In the second part, we consider the quality control chart design for the multiple machine environment operating under jidoka (autonomation) policy, in which the opportunities are due to individual machine stoppages. We provide the exact model derivation and an approximate model employing the single machine model developed in the first part. For both models, we conduct extensive numerical studies and observe that modeling the inspection and repair opportunities provide considerable cost savings. We also show that partitioning of the machines as opportunity takers and opportunity non-takers yields further cost savings. In the third part, we consider the dynamic lot sizing problem with finite capacity and where there are opportunities to keep the process warm at a unit variable cost for the next period if more than a threshold value has been produced. For this warm/cold process, we develop a dynamic programming formulation of the problem and establish theoretical results on the optimal policy structure. For a special case, we show that forward solution algorithms are available, and provide rules for identifying planning horizons. Our numerical study indicates that utilizing the undertime option results in significant cost savings, and it has managerial implications for capacity planning and selection.
Open Access
An investigation of the effects of population dynamics on growth and trade in an overlapping-generations general equilibrium model
(Bilkent University, 2004) Jelassi, Mohamed Mehdi
In this study, variants of a two-sector, two-factor overlapping-generations model are solved under autarky and free trade scenarios to investigate the effects of population dynamics on growth and trade. Simulation exercises are also performed to develop a deeper understanding of the analytical findings and to visualize the time paths of model variables. These numerical exercises complement analytical solutions, providing significant insights into the nature of initial conditions affecting growth and convergence performance of closed economies. Concerning open economies, possible implications of population growth differentials for the patterns of trade flows between economies that are identical except for population growth rates are explored as in the static Heckscher-Ohlin model. Our analysis shows that population growth rate differentials give way to differences in relative commodity and factor prices, creating the basis for comparative advantages in the same way as suggested by the static Heckscher-Ohlin model. We also show that these demographic differences prevent comparative advantages from getting eliminated in the long-run, thereby allowing trade to continue to occur even after the steady state is reached. Our solutions reveal, however, that trade does not necessarily improve welfare for both parties in the long-run. The explanation we offer for this nicely complements previous studies that obtained similar results using overlapping-generations general equilibrium models within two country set-ups with steady populations.
Open Access
Five essays on monetary policy applications in an open economy under economic uncertainty and shocks
(Bilkent University, 2004) Dinçer, Nazire Nergiz
In this dissertation, we analyzed the monetary policy applications under uncertainty and shocks and their effects on the economy. The uncertainties we concern are inflation uncertainty and exchange rate risk, whereas the shocks are the unexpected exchange rate shocks, change in parity and capital flights. The case study is Turkey, except the analysis on inflation uncertainty, which is on G-7 countries. The analyses on inflation uncertainty suggest that inflation increases inflation uncertainty for G-7 countries, whereas inflation uncertainty decreases inflation for four countries. Therefore, when uncertainty is high, the central bank reduces those real costs at the margin by reducing inflation. On the other hand, the effects of exchange rate risk are an increase in prices, a depreciation of the real exchange rate, and a decrease in the output. In the face of unexpected currency depreciation or appreciation, the economic activity decreases. The effects of an improvement in the USD-Euro parity on an open economy, where the denomination composition of trade is asymmetric is an appreciation of the real exchange rate, an increase in the relative income and an improvement in the trade balance. The empirical analyses on capital outflows suggest that growth decreases, inflation increases and exchange rate depreciates, which are critical negative signals for an economy. Overall this dissertation suggests that when designing a policy program, it is important to consider the possible deviations from the policies. Otherwise, it would not be possible to achieve the targets, moreover the costs would be too high for the economy.
Open Access
Three essays on inflation and monetary policy in Turkey
(Bilkent University, 2003) Us, Vuslat
This dissertation analyzes three studies on inflation dynamics and monetary policy alternatives in Turkey. In the first article, inflation inertia is analyzed. To this aim, expectations are assumed to be formed optimal univariate in a staggared contracts model setting,. An alternative assumption, which then would be subject to Lucas critique, is that expectations are naive. Consequently, the analysis favors the first alternative to the latter one in explaining high and persistent inflation. In the second study, the degree of currency substitution is analyzed by using various definitions. More specifically, ratchet effect in currency substitution is studied by Autoregressive distributed lag (ADL) procedure. The statistical evidence suggests that even though currency substitution has been persistent at an increasing degree, the economy at large has not been irreversibly dollarized yet. The final study of this dissertation discusses monetary transmission mechanism in a small structural model setting. In this framework, using various simulations the implementation of a standard Taylor Rule is analyzed. The alternative proposal is the use a monetary conditions index as a policy rule. The results show that the second alternative is preferable since the economy is then exposed to lessened volatility.
Open Access
Representing information flow in building design process using the parameter-based design structure matrix
(Bilkent University, 2003) Pektaş, Şule Taşlı
The Architecture/Engineering/Construction (AEC) industry is one of the multidisciplinary domains in which collaboration among related parties is of utmost importance. Despite the intense flow of information between design professionals, there is a lack of research to better understand and manipulate these flows. Most of the current process modeling tools in the AEC industry do not enable analyses of iterative information cycles. Moreover, these tools represent the process at high levels, thus, they are inappropriate for multi-parameter problems like building design. With a view to alleviate these problems, this thesis introduces the use of parameter-based design structure matrix as a process modeling and system analysis tool for building design. The method reveals insights into the process structure, optimum sequence of parameter decisions, iterative cycles and concurrency in the process. A framework for parameter-based DSM applications in building design is proposed and the application of the framework is demonstrated through two case studies on real life building design problems. Keywords: Collaborative Building Design, Design Integration, Design Management, Design Process Modeling, Information Flow, and Parameter-based Design Structure Matrix.