Sumru Altug | Koç University (original) (raw)
Papers by Sumru Altug
This paper characterizes business cycle phenomena in a sample of 22 developed and developing econ... more This paper characterizes business cycle phenomena in a sample of 22 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 comparison of the business cycle turning points implied by this study and those derived in other studies and by other methods. Our findings document the importance of heterogeneity of individual countries' experiences. We also argue that consideration of a large and diverse group of countries provides an alternative perspective on the co-movement of aggregate economic activity worldwide.
Macroeconomic Dynamics, 1999
for sharing their computer codes with us.
This paper considers the sources of long-term economic growth for Turkey over the period 1880-200... more This paper 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 paper provides a unique look at the growth experience of these two different political and economic regimes. The
European Review of Economic History, 2008
The Sources of Long-term Economic Growth for Turkey, 1880-2005* This paper considers the sources ... more The Sources of Long-term Economic Growth for Turkey, 1880-2005* This paper 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 paper provides a unique look at the growth experience of these two different political and economic regimes. The paper examines in detail the evolution of factors that led to growth in output across broad periods, including the post WWII period and the era or globalization beginning in the 1980's. It also considers output growth in the agricultural and non-agricultural sectors separately and allows for the effects of sectoral re-allocation. The lessons from this exercise have important implications for Turkey's future economic performance, for its ability to converge to per capita income levels of developed countries, and for the viability of its current bid for European Union membership.
International Journal of Forecasting, 2016
ABSTRACT In this paper, we formulate a statistical model of inflation that combines data on surve... more ABSTRACT 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 the inflation target set by the monetary authority to examine the effectiveness of monetary policy in forming inflation expectations and therefore, predicting inflation accurately. The results indicate superior predictive power for the proposed framework compared to the model without survey expectations as well as several popular benchmarks such as the backward and forward looking Phillips curves and a naive forecasting rule.
There is evidence that tax rates have varied considerably through time. In the postwar years, cha... more 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.
In this paper, we study the dynamic interdependence of real bond and stock returns, inflation, ch... more In this paper, we study the dynamic interdependence of real bond and stock returns, inflation, changes in real exchange rates, and industrial production for two small open economies, ~vI1exico and Turkey, for the period 1988-1997. For this purpose, we use an unrestricted vector autoregression (VAR) analysis. The relationship among real asset returns, inflation, and real activity has been studied extensively for the U.S. economy. In the finance literature, Fama (1981) and others established the existence of a negative correlation between stock returns and inflation, a finding that is contrary to the view that financial assets such as stocks and bonds are pure hedges against inflation.(1) Sims (1992), and others have studied the relationship among asset retums, inflation, and real activity from the viewpoint of assessing the real effects of monetary policy. Other papers have extended this analysis to a small open economy (Cushman and Zha, 1997) and to a multicountry framework (Canova and De Nicolo, 1997).
This paper characterizes the business cycle as a recurring Markov chain for a broad set of develo... more 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 a parsimonious approach that allows
for sharing their computer codes with us.
The literature on the effects of changes in tax policy on investment behavior has typically abstr... more 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 examine the impact of different prior beliefs owing to different policy announcements, and of changes in policy volatility when firms are learning. Our results show that uncertainty about tax policy has a large detrimental impact on investment.
Topics in Macroeconomics
We examine bank lending decisions in an economy with spillover effects in the creation of new inv... more 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 pricesetting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems and ineffective bank monitoring, then an equilibrium emerges in which loan supply is strategically restricted. In this equilibrium, the loan restriction, the "under-lending" strategy, provides an advantage to one bank by increasing its market share and sustaining monopoly interest rates. The bank's incentives for doing so increase under conditions of increased volatility of lending capacities of banks, more severe borrower-side moral hazard, and lower returns on the investment projects. Although this equilibrium is not always unique, with poor bank monitoring and corporate governance, a more intense banking competition renders the bad equilibrium the unique outcome.
Emerging Markets Finance and Trade
Macroeconomic Dynamics
The transcript of a panel discussion marking three decades of the real business cycle approach to... more 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, John Long, Thomas Cooley, and Gary Hansen. The discussion is moderated by Sumru Altug and Warren Young. The panel touches on a wide variety of issues related to real business cycle models, including their history and methodology, starting with the work of Prescott and Kydland at Carnegie Tech and Plosser and Long at Rochester; their applications to policy; and their role in the recent financial crisis and likely future. The panel discussion was held in a session sponsored by the History of Economics Society at the Allied Social Sciences Association (ASSA) meetings in the Randle A Room of the Manchester Grand H...
This paper characterizes business cycle phenomena in a sample of 27 developed and developing econ... more 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 identifyingdistinct economic regimes for each country in question. The paper also provides a comparison of the business cycle turning points implied by this
OECD Journal: Journal of Business Cycle Measurement and Analysis, 2014
This paper develops a set of leading indicators of industrial production growth and consumer pric... more 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 , amongst others. We find that asset prices that reflect expectational factors or interest rates that capture the costs of borrowing for the Turkish economy tend to have the greatest predictive power for future real activity and inflation. Our findings provide evidence on the factors determining real activity and inflation in a period of disinflation and normalization for the Turkish economy.
This paper characterizes business cycle phenomena in a sample of 22 developed and developing econ... more This paper characterizes business cycle phenomena in a sample of 22 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 comparison of the business cycle turning points implied by this study and those derived in other studies and by other methods. Our findings document the importance of heterogeneity of individual countries' experiences. We also argue that consideration of a large and diverse group of countries provides an alternative perspective on the co-movement of aggregate economic activity worldwide.
Macroeconomic Dynamics, 1999
for sharing their computer codes with us.
This paper considers the sources of long-term economic growth for Turkey over the period 1880-200... more This paper 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 paper provides a unique look at the growth experience of these two different political and economic regimes. The
European Review of Economic History, 2008
The Sources of Long-term Economic Growth for Turkey, 1880-2005* This paper considers the sources ... more The Sources of Long-term Economic Growth for Turkey, 1880-2005* This paper 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 paper provides a unique look at the growth experience of these two different political and economic regimes. The paper examines in detail the evolution of factors that led to growth in output across broad periods, including the post WWII period and the era or globalization beginning in the 1980's. It also considers output growth in the agricultural and non-agricultural sectors separately and allows for the effects of sectoral re-allocation. The lessons from this exercise have important implications for Turkey's future economic performance, for its ability to converge to per capita income levels of developed countries, and for the viability of its current bid for European Union membership.
International Journal of Forecasting, 2016
ABSTRACT In this paper, we formulate a statistical model of inflation that combines data on surve... more ABSTRACT 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 the inflation target set by the monetary authority to examine the effectiveness of monetary policy in forming inflation expectations and therefore, predicting inflation accurately. The results indicate superior predictive power for the proposed framework compared to the model without survey expectations as well as several popular benchmarks such as the backward and forward looking Phillips curves and a naive forecasting rule.
There is evidence that tax rates have varied considerably through time. In the postwar years, cha... more 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.
In this paper, we study the dynamic interdependence of real bond and stock returns, inflation, ch... more In this paper, we study the dynamic interdependence of real bond and stock returns, inflation, changes in real exchange rates, and industrial production for two small open economies, ~vI1exico and Turkey, for the period 1988-1997. For this purpose, we use an unrestricted vector autoregression (VAR) analysis. The relationship among real asset returns, inflation, and real activity has been studied extensively for the U.S. economy. In the finance literature, Fama (1981) and others established the existence of a negative correlation between stock returns and inflation, a finding that is contrary to the view that financial assets such as stocks and bonds are pure hedges against inflation.(1) Sims (1992), and others have studied the relationship among asset retums, inflation, and real activity from the viewpoint of assessing the real effects of monetary policy. Other papers have extended this analysis to a small open economy (Cushman and Zha, 1997) and to a multicountry framework (Canova and De Nicolo, 1997).
This paper characterizes the business cycle as a recurring Markov chain for a broad set of develo... more 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 a parsimonious approach that allows
for sharing their computer codes with us.
The literature on the effects of changes in tax policy on investment behavior has typically abstr... more 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 examine the impact of different prior beliefs owing to different policy announcements, and of changes in policy volatility when firms are learning. Our results show that uncertainty about tax policy has a large detrimental impact on investment.
Topics in Macroeconomics
We examine bank lending decisions in an economy with spillover effects in the creation of new inv... more 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 pricesetting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems and ineffective bank monitoring, then an equilibrium emerges in which loan supply is strategically restricted. In this equilibrium, the loan restriction, the "under-lending" strategy, provides an advantage to one bank by increasing its market share and sustaining monopoly interest rates. The bank's incentives for doing so increase under conditions of increased volatility of lending capacities of banks, more severe borrower-side moral hazard, and lower returns on the investment projects. Although this equilibrium is not always unique, with poor bank monitoring and corporate governance, a more intense banking competition renders the bad equilibrium the unique outcome.
Emerging Markets Finance and Trade
Macroeconomic Dynamics
The transcript of a panel discussion marking three decades of the real business cycle approach to... more 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, John Long, Thomas Cooley, and Gary Hansen. The discussion is moderated by Sumru Altug and Warren Young. The panel touches on a wide variety of issues related to real business cycle models, including their history and methodology, starting with the work of Prescott and Kydland at Carnegie Tech and Plosser and Long at Rochester; their applications to policy; and their role in the recent financial crisis and likely future. The panel discussion was held in a session sponsored by the History of Economics Society at the Allied Social Sciences Association (ASSA) meetings in the Randle A Room of the Manchester Grand H...
This paper characterizes business cycle phenomena in a sample of 27 developed and developing econ... more 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 identifyingdistinct economic regimes for each country in question. The paper also provides a comparison of the business cycle turning points implied by this
OECD Journal: Journal of Business Cycle Measurement and Analysis, 2014
This paper develops a set of leading indicators of industrial production growth and consumer pric... more 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 , amongst others. We find that asset prices that reflect expectational factors or interest rates that capture the costs of borrowing for the Turkish economy tend to have the greatest predictive power for future real activity and inflation. Our findings provide evidence on the factors determining real activity and inflation in a period of disinflation and normalization for the Turkish economy.