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Publication Open Access Algeria’s manufacturing sector: few avenues to diversification(The Lebanese Center for Policy Studies, 2017) Bustos, Sebastian; Department of Economics; Yıldırım, Muhammed Ali; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 219280This policy report on Algeria’s industrial sector is the eighth in a series of reports aimed at identifying strategic options Arab countries have in undertaking structural transformation. Using the product space methodology, this report analyzes existing capabilities of selected economies by identifying products they currently export and determining which path they should follow to produce more sophisticated and strategic products. Algeria’s position in the product space suggests that the country’s future path for development should focus on new opportunities in the chemical and food clusters. Redeploying productive knowledge that already exists within the country into other more complex products would prove difficult but the current position implies that, unaided, the economy is unlikely to diversify. This suggests the need to adopt proactive industrial policies entailing a number of new industries or products at which to target public inputs.Publication Open Access Arab country product space report introduction and methodology(The Lebanese Center for Policy Studies, 2017) Bustos, Sebastian; Department of Economics; Yıldırım, Muhammed Ali; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 219280During the decades prior to the Arab spring, Arab countries on average had one of the lowest per capita growth rates compared to other parts of the world. Although countries in the region registered higher growth rates at the beginning of the century, this economic growth did not bring about a structural transformation required to diversify Arab economies. The challenge remains not only in how to ensure these economies grow but also to ensure that growth is inclusive and sustainable. The general objective of the report is to lay out the strategic options Arab countries have in undertaking structural transformation. Using the product space methodology, the existing capabilities of selected economies are analyzed by locating products they currently export, which assists in determining which path they should follow to produce more sophisticated and strategic products.Publication Open Access Bank volatility connectedness in South East Asia(2018) Department of Economics; Yılmaz, Kamil; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 6111This paper presents an analysis of the volatility connectedness of major bank stocks in the South East Asia (SEACEN) region between 2004 and 2016. Applying the Diebold-Yilmaz Connectedness Index (DYCI) framework to daily stock return volatilities of major banks in the region, we obtain results that help us uncover valuable information on the region's static and dynamic bank volatility network. The volatility connectedness increased substantially during the US financial crisis (from 2007 to 2009) and during the European sovereign debt and banking crisis in 2011. The recent increase in the total connectedness has resulted from temporary financial shocks on a global scale. Once included in the analysis, the global systemically important banks (GSIBs) from the U.S. and Europe generate substantial volatility connectedness to SEACEN banks. We also identify country clusters in the banking volatility network. Major Indian, Taiwanese and Chinese banks generate volatility connectedness to their counterparts in other countries of the region. Finally, we show that the region's bank volatility network becomes tighter during systemic events; banks from different countries in the region generate volatility connectedness to the others.Publication Open Access Edgeworth expansion based correction of selectivity bias in models of double selection(2012) Yavuzoğlu, Berk; Department of Economics; Tunalı, Fehmi İnsan; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 105635Edgeworth expansions are known to be useful for approximating probability distributions and moments. In our case, we exploit the expansion in the context of models of double selection embedded in a trivariate normal structure. We assume bivariate normality among the random disturbance terms in the two selection equations but allow the distribution of the disturbance term in the outcome equation to be free. This sets the stage for a control function approach to correction of selectivity bias that affords tests for the more common trivariate normality specifi-cation. Other recently proposed methods for handling multiple outcomes are Multinomial Logit based selection correction models. An empirical example is presented to document the differ-ences among the results obtained from our selectivity correction approach, trivariate normality specification and Multinomial Logit based selection correction models.Publication Open Access Egypt’s manufacturing sector: seizing on an advantageous product space position(The Lebanese Center for Policy Studies, 2017) Bustos, Sebastian; Department of Economics; Yıldırım, Muhammed Ali; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 219280This policy report on Egypt’s industrial sector is the third in a series of reports aimed at identifying strategic options Arab countries have in undertaking structural transformation. Using the product space methodology, this report analyzes existing capabilities of selected economies by identifying products they currently export and determining which path they should follow to produce more sophisticated and strategic products. A study of Egypt’s product space reveals the country should develop the machinery and chemicals & allied industry since they would increase the country’s product complexity index. To meet this specific goal and to enhance production in other sectors, Egypt should focus on providing support and public inputs—such as infrastructure and regulation—to existing industries with the aim of improving their productivity and ability to jump to nearby opportunities.Publication Open Access Exploring the nexus between inflation and globalization under inflation targeting through the lens of New Zealand's experience(2017) Martínez-García, Enrique; Soytaş, Mehmet Ali; Department of Economics; Kabukçuoğlu, Ayşe; Faculty Member; Department of Economics; College of Administrative Sciences and EconomicsWe investigate empirically the inflation dynamics in New Zealand, a small open economy and a pioneer in inflation targeting, under various open-economy Phillips curve specifications. Our forecasting exercise suggests that open-economy Phillips curves under standard measures of global slack do not help forecast domestic inflation, possibly indicating measurement problems with global slack itself. In turn, under a stable inflation target we still find that (i) global inflation and (ii) global inflation and oil prices have information content for headline CPI and core CPI inflation over the 1997:Q3-2015:Q1 period and appear to be reliable proxies for global slack in forecasting inflation.Publication Open Access Female labor force participation in Turkey: a synthetic cohort analysis, 1988-2013(2017) Kırdar, Murat Güray; Dayıoğlu, Meltem; Department of Economics; Tunalı, Fehmi İnsan; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 105635We study the aggregate labor force participation behavior of women over a 25-year period in Turkey using a synthetic panel analysis. In our decomposition of age, year, and cohort effects, we use three APC models that have survived the scrutiny of the demography community. We rely on predictions from just-identified models that render different methods comparable. The exercise is carried out by rural/urban status and by education to tease out some key differences in behavior. Our comparative methodology yields remarkably robust age-profiles that represent the behavior of a typical woman over her life-cycle. Notably an M-shape attributable to child-bearing related concerns is detected in rural areas and for low-educated women in urban areas. We also find that later birth-cohorts among the less-educated women—which constitutes the majority of the female workforce—are significantly more likely to participate, which implies that the recent rise in the aggregate participation rates is not only due to rising education levels and that the current substantial gap in participation by education will decrease.Publication Open Access Inflation as a global phenomenon-nsome implications for inflation modelling and forecasting(Elsevier, 2018) Martinez-Garcia, Enrique; Department of Economics; Kabukçuoğlu, Ayşe; Faculty Member; Department of Economics; College of Administrative Sciences and EconomicsWe model local inflation dynamics using global inflation and domestic slack motivated by a novel interpretation of the implications of the workhorse open-economy New Keynesian model. We evaluate the performance of inflation forecasts based on the single-equation forecasting specification implied by the model, exploiting the spatial pattern of international linkages underpinning global inflation. We find that incorporating cross-country interactions yields significantly more accurate forecasts of local inflation for a diverse group of 14 advanced countries (including the U.S.) than either a simple autoregressive model or a standard closed-economy Phillips curve-based forecasting model. We argue that modelling the temporal dimension—but not the cross-country spillovers—of inflation does limit a model’s explanatory power in-sample and its (pseudo) out-of-sample forecasting performance. Moreover, we also show that global inflation (without domestic slack) often contributes the most to achieve the gains on forecasting accuracy observed during our sample period (1984:Q1-2015:Q1)—this observation, according to theory, is crucially related to the flattening of the Phillips curve during this time period of increased globalization.Publication Open Access Iraq’s manufacturing sector: a challenging path to more products(The Lebanese Center for Policy Studies (LCPS), 2017) Bustos, Sebastian; Department of Economics; Yıldırım, Muhammed Ali; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 219280This policy report on Iraq’s industrial sector is the seventh in a series of reports aimed at identifying strategic options Arab countries have in undertaking structural transformation. Using the product space methodology, this report analyzes existing capabilities of selected economies by identifying products they currently export and determining which path they should follow to produce more sophisticated and strategic products. A study of Iraq’s product space reveals that given its limited diversification and strong dependence on oil, the country’s future path for development should focus on new opportunities in the foodstuff and chemical clusters. To meet this goal, industrial policy should focus on selecting a number of new industries or products at which to target public inputs in order to provide temporary public support that will attract and facilitate private investment in new products.Publication Open Access Is the Turkish current account deficit sustainable?(2017) Abbasoğlu, Osman Furkan; İmrohoroğlu, Ayşe; Department of Economics; Kabukçuoğlu, Ayşe; Faculty Member; Department of Economics; College of Administrative Sciences and EconomicsDuring the 2011-2015 period, Turkey's current account deficit as a percentage of GDP was one of the largest among the OECD countries. In this paper, we examine if this deficit can be considered sustainable using the Engel and Rogers (2006) approach. In this framework, the current account of a country is determined by the expected discounted present value of its future share of world GDP relative to its current share. A country, whose income is anticipated to rise relative to the rest of the world is expected to borrow now and run a current account de cit. Our findings suggest that Turkey's current account deficit in 2015 may be considered sustainable if the Turkish economy's share in the world economy could continue to grow at rates similar to the past. The same approach, however, indicates that the current account deficit in 2011, at its peak, was unlikely to be sustainable.