Scholarly Publications - Economics
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Item Open Access Turkish straits and an important oil price benchmark: Urals(International Association for Energy Economics, 2023-07-01) Ayasli, D.E.; Yalcin, Y.; Sahin, S.; Berument, M. HakanThe Turkish Straits is one of the busiest waterways in the World. Around 4% of the world’s crude oil trade passes through the Turkish Straits. We model the CIF Mediterranean price of Urals crude, one of the world’s most critical medium gravity crude brands that passes through the Turkish Straits. The empirical evidence provided here suggests that congestion (measured in terms of the waiting time for entering the Turkish Straits) increases the CIF Mediterranean price of Urals crude up to 5.05% and 3.09% for the İstanbul and Çanakkale straits, respectively. However, similar supporting evidence could be found for neither an important benchmark oil (Brent) nor Iranian Light, which has similar characteristics and can be considered a close substitute for Urals crude in the Mediterranean refinery market. This shows that the Turkish Straits have an important impact on the price of this important medium crude oil in world oil markets.Item Embargo Moves, motives, and words: Introduction to the special issue on bargaining process(Elsevier BV, 2023-04-18) Bolton, Gary E.; Karagözoğlu, EminItem Open Access Implementation with a sympathizer(Elsevier B.V., 2022-12-15) Altun, O. A.; Barlo, M.; Dalkıran, Nuh AygünWe study Nash implementation under complete information with the distinctive feature that the planner knows neither individuals’ state-contingent preferences (payoff states) nor how they correspond to the states of the economy on which the social goal depends. Our main question is whether or not the planner can extract only the essential information about individuals’ underlying preferences and simultaneously implement the given social goal. Our setup is especially relevant when the planner cannot use mechanisms asking for the full revelation of the payoffs states due to privacy and political correctness concerns or non-disclosure and confidentiality agreements. In economic environments with at least three individuals, we show that the planner may Nash implement a social goal while extracting only the essential information about the payoff states from the society whenever this goal has standard monotonicity properties and one of the individuals whose identity is not necessarily known to the planner and the other individuals, is a sympathizer. Vaguely put, such an agent is inclined toward the truthful revelation of the essential information about how states of the economy are associated with individuals’ preferences, while he is not inclined to reveal the realized ‘true’ state of the economy. Then, in every Nash equilibrium of the mechanism we design, all individuals truthfully disclose the same essential information about the payoff states.Item Embargo Office spaces and urban costs(Taylor&Francis, 2023-05-10) Abdurahimov, RamizThis paper aims to provide insights about the role of professional businesses, which are inputs that are sourced more locally than material inputs, in shaping urban land prices. Exploiting an exogenous variation in the form of market access, I estimate how much land prices change as a response to an increase in the use of housing by professional business services. I find that a percentage increase in local office propensity increases urban land prices by 0.59%, controlling for numerous geographical and socio-economic factors. The estimated effect is twice larger when corrected for the endogeneity bias.Item Open Access Bounded unit root processes with non-stationary volatility(Taylor and Francis Ltd., 2021-02-08) Göğebakan, Kemal Çağlar; Eroğlu, B. A.This article concerns the unit root testing under nonstandard conditions for a time series process, such as having an innovation process with non-stationary variance and being limited inside an interval. These conditions are investigated separately in the unit root literature and shown to cause problems, such as size distortions. In this article, we consider the presence of both conditions in the unit root tests simultaneously. The simulation results indicate that the previous methods fail to provide satisfactory inference performance under the simultaneous presence of these conditions. To alleviate this issue, we propose a robust unit root testing mechanism and derive this procedure’s asymptotic properties.Item Open Access Chapter 22: Futures and options(Edward Elgar Publishing, 2023-05-18) Gürkaynak, Refet S.; Wright, Jonathan H.We survey the history, market structure, pricing and usage of futures and options contracts. We focus in particular on their ability to provide high-frequency measures of expectations, uncertainty, higher moments, and investor risk aversion. Futures and options are a rich and growing treasure trove of information to academics and policymakers alike.Item Open Access Chapter 6: Banks(Edward Elgar Publishing, 2023-05-18) Gürkaynak, Refet S.; Wright, Jonathan H.; Zakrajšek, EgonBanking is a particular model of financial intermediation whereby one institution takes in liquid deposits and makes longer-term, generally illiquid, loans. This is a very specific and potentially unstable form of financial intermediation. Nonetheless, it is ubiquitous over time and across countries. This chapter reviews the reasons why banks exist and are so important, and what impact they have on the real economy. It concludes with a discussion of stablecoins and central bank digital currencies, which are closely related to banking.Item Open Access Equitable stable matchings under modular assessment(ACM, 2023-07-09) Alkan, A.; Yıldız, KemalItem Open Access Market reactions to COVID-19: does systemic risk vary across industries? a Markov-switching CAPM approach(Routledge, 2023-02-13) Bulut, Emre; Marangoz, C.; Daştan, M.Despite a broad consensus on the response of US stock market vola-tility to the coronavirus outbreak, our micro-level understanding of its variation across industries still needs to be improved. This study contributes to the existing literature by providing an industry-level analy-sis of the COVID-19 pandemic with two different states. Evidence from the MS-CAPM model indicates the role of portfolio diversification. Specifically, the results reveal that some industries, such as materials, real estate, communication, and utilities, have much higher expected returns. On the other hand, other sectors, including consumer discre-tionary, industrials, and information technology, become less volatile than the market during the lockdown period.Item Open Access Exchange rate and inflation under weak monetary policy: Turkey verifies theory(Oxford University Press, 2023-8-7) Gürkaynak, Soykan Refet; Kısacıkoğlu, Burçin; Lee, Sang SeokFor the academic audience, this paper presents the outcome of a well-identified, large change in the monetary policy rule from the lens of a standard New Keynesian model and asks whether the model properly captures the effects. For policymakers, it presents a cautionary tale of the dismal effects of ignoring basic macroeconomics. In doing so, it also clarifies how neo-Fisherian disinflation may work or fail, in theory and in practice. The Turkish monetary policy experiment of the past decade, stemming from a belief of the government that higher interest rates cause higher inflation, provides an unfortunately clean exogenous variance in the policy rule. The mandate to keep rates low, and the frequent policymaker turnover orchestrated by the government to enforce this, led to the Taylor principle not being satisfied and eventually a negative coefficient on inflation in the policy rule. In such an environment, was the exchange rate still a random walk? Was inflation anchored? Does the “standard model” suffice to explain the broad contours of macroeconomic outcomes in an emerging economy with large identifying variance in the policy rule? There are no surprises for students of open-economy macroeconomics; the answers are no, no and yes.Item Open Access Mental pictures structural constraints Kenneth N. Waltz’s approach to theory(SAGE Publications, 2023-08-18) Güner, SerdarThe aim of this article is to develop Kenneth N. Waltz’s conceptualization of system structures based on the distribution of capabilities to those described by two traits at system-level: the distribution of capabilities across states and states’ geographic positions with respect to each other, that is, the contiguity configuration. The development generates taxonomies of structures evaluated as mental pictures that guide, organize, and channel thoughts by identifying the ways system structures constrain international interactions. Mental pictures are argued to derive from a multiplicity of interrelated neurophysiological processes of the brain according to functionalism which is a monist doctrine of the philosophy of mind. Mental pictures establish structural constraints as products of an algorithm based on realism and system theory depicting a neo-Kantian view of how our minds impose order on sensory data.Item Open Access Kantian equilibria of a class of Nash bargaining games(John Wiley and Sons Inc, 2023-02-13) Dizarlar, Atakan; Karagözoğlu, EminWe study Kantian equilibria of an (Figure presented.) -player bargaining game, which is a modified version of the well-known divide-the-dollar game. We first show that the Kantian equilibrium exists under fairly minimal assumptions. Second, if the bankruptcy rule used satisfies equal treatment of equals, and is almost nowhere proportional, then only equal division can prevail in any Kantian equilibrium. On the other hand, we show that an “anything goes” type result emerges only under the proportional rule. Finally, using hybrid bankruptcy rules that we construct in a novel fashion, we can characterize the whole equilibrium set. Our results highlight the interactions between institutions (axiomatic properties of division rules) and agents' equilibrium behavior.Item Open Access Introduction to the research handbook of financial markets(Edward Elgar Publishing, 0018-05-20) Gürkaynak, Refet S.; Wright, Jonathan H.This introduction sets the background to the Handbook of Financial Markets; a volume of 22 chapters on the state of different financial markets. It gives a discussion of the historical background to financial markets and the linkages between finance and the broader economy, emphasizing the importance of central banks in modern finance. It explains how the chapters are linked together and are not just a collection of standalone essays. The introduction gives a roadmap of the sections of the book, on central banking, financial intermediaries, money markets, capital markets, and derivative markets; and describes how the book addresses both historical background and recent market developments, as well as highlighting open questions.Item Open Access Research handbook of financial markets(Edward Elgar Publishing, 2023-05-18) Gürkaynak, Refet; Wright, JonathanThe Research Handbook of Financial Markets carefully discusses the histories and current states of the most important financial markets and institutions, as well as explicitly underscoring open questions that need study. By describing the institutional structure of different markets and highlighting recent changes within them, it accurately highlights their evolving nature.Item Open Access Improving workplace climate in large corporations: a clustered randomized intervention(Oxford University Press, 2022-09-22) Alan, Şule; Çörekçioğlu, G.; Sutter, M.We evaluate the impact of a training program aimed at improving the relational atmosphere in the workplace. The program encourages prosocial behavior and the use of professional language, focusing primarily on leaders' behavior and leader-subordinate interactions. We implement this program using a clustered randomized design involving over 3,000 headquarters employees of 20 large corporations in Turkey. We evaluate the program with respect to employee separation, pro- and antisocial behavior, the prevalence of support networks, and perceived workplace climate. We find that treated firms have a lower likelihood of employee separation at the leadership level, fewer employees lacking professional and personal help, and denser, less segregated support networks. We also find that employees in treated corporations are less inclined to engage in toxic competition, exhibit higher reciprocity toward each other, and report higher workplace satisfaction and a more collegial environment. The program's success in improving leader-subordinate relationships emerges as a likely mechanism to explain these results. Treated subordinates report higher professionalism and empathy in their leaders and are more likely to consider their leaders as professional support providers.Item Open Access Analyzing strategic behavior in a dynamic model of bargaining and war(Springer, 2023-09-19) Doğan, Serhat; Keskin, K.; Sağlam, ÇağrıWe analyze a dynamic model of bargaining and war with two states located on a linear territory. One state demands a portion of the other state’s territory each period such that if the latter state makes a concession, the former state takes control of the demanded portion. If otherwise, the two states engage in warfare to decide which state controls the disputed portion of territory. À la Fearon, we consider a model in which the states bargain over objects that influence future bargaining power. That is, it is valuable to have more territory, not only because it brings higher utility, but also because it increases future bargaining power, as it can be used to generate military resources in wars to come. We implicitly characterize the unique Markov perfect equilibrium of the model, and utilizing a set of parameter values, we illustrate that there are six different types of equilibrium outcomes. We then provide a variety of historical examples and argue that our model is able to capture their patterns and characteristics.Item Open Access Large tullock contests(Springer Nature, 2023-05-25) Doğan, Serhat; Karagözoğlu, Emin; Sağlam, Çağrı; Keskin, K.We characterize the equilibrium effort function of a large Tullock contest game with heterogeneous agents under mild conditions on the contest success function and effort cost function. Later, writing the equilibrium total effort explicitly under a uniform type distribution, we identify the effort-maximizing large Tullock contest. It is shown that the contest designer needs to increase the curvature of the effective effort function, thereby encouraging high-type agents to exert even higher efforts, as the curvature of the effort cost function increases or the support of the type distribution gets narrower.Item Open Access Behavioral implementation under incomplete information(Elsevier, 2023-09-11) Dalkıran, Nuh Aygün; Barlo, M.We investigate implementation under incomplete information allowing for individuals' choices featuring violations of rationality. Our primitives are individuals' interim choices that do not have to satisfy the weak axiom of revealed preferences. In this setting, we provide necessary as well as sufficient conditions for behavioral implementation under incomplete information. We also introduce behavioral interim incentive Pareto efficiency and investigate its implementability under incomplete information.Item Open Access Education and consanguineous marriage(The University of Chicago Press, 2023-01-25) Akyol, Pelin; Mocan, N.At least one of every five marriages is consanguineous (between couples who aresecond cousins or closer) in the Middle East and North Africa, and the rate ishigher than 50% in some parts of the world. We find that a Turkish education re-form that increased mandatory schooling by 3 years made women less likely tofind consanguineous marriage an acceptable practice. The reform reduced wom-en’s propensity to marry a first cousin or a blood relative, and it altered women’spreferences in favor of personal autonomy, indicating that educational attain-ment alters behaviors and attitudes that may be rooted in culture.Item Open Access Pairs trading with wavelet transform(2023-07) Eroğlu, Burak A.; Yener, H.; Yiğit, TanerWe show that applying the wavelet transform to S&P 500 constituents' prices generates a substantial increase in the returns of the pairs-trading strategy. Pairs trading strategy is based on finding prices that move together, but if there is shared noise in the asset prices, the co-movement, on which one base the trades, might be caused by this common noise. We show that wavelet transform filters away the noise, leading to more profitable trades. The most notable change occurs in the parameter estimation stage, which forms the weights of the assets in the pairs portfolio. Without filtering, the parameters estimated in the training period lose relevance in the trading period. However, when prices are filtered from common noise, the parameters maintain relevance much longer and result in more profitable trades. Particularly, we show that more precise parameter estimation is reflected on a more stationary and conservative spread, meaning more mean reversion in opened pairs trades. We also show that wavelet filtering the prices reduces the downside risk of the trades considerably.