International Conference on Eurasian Economies
11-13 June 2019 – Famagusta, Turkish Republic of Northern Cyprus
Paper properties
Paper ID : 2351
Status : Paper published
Language : Turkish
Topic : Macroeconomics
Presenter: Prof. Dr. Mustafa İsmihan
Session : 1C Para ve Bankacılık
The Dual Adjustment Approach with an Application to the Investment Function for Turkey (1963-2017)
İkili Uyarlanma Yaklaşımı: Türkiye için Yatırım Fonksiyonu Uygulaması (1963-2017)
- Prof. Dr. Mustafa İsmihan (Eastern Mediterranean University, TR of Northern Cyprus)
- Dr. Mustafa Can Küçüker (Atılım University, Türkiye)
Abstract
The dual adjustment approach enables us to consider separate dual co-movements of permanent and transitory components of time series variables and hence the possibility of dual adjustment. The common {filtered} trend concept is developed within the framework of dual adjustment approach and a simple test for the existence of such relationship is suggested for nonstationary macroeconomic variables. This paper investigates the dual adjustment with an application to the private sector fixed capital investment function by using the Turkish data over the 1963-2017 period. Our results indicated that private sector fixed capital investment and income, public sector fixed capital investment and macroeconomic instability are not cointegrated and hence they have spurious relationship. In contrast, according to the dual adjustment approach, these variables have a long run relationship. Additionally, it is shown that there are dual relationships between permanent and temporary components of private sector fixed capital investment and income. Furthermore, it is shown that there is no long run relationship between private sector fixed capital investments and public sector fixed capital investments but they are negatively related in the short run. In addition, it is concluded that macroeconomic instability is detrimental for private sector fixed capital investments only in the long run.
JEL codes: E27, C22
İsmihan, Mustafa, Küçüker, Mustafa Can (2019). "The Dual Adjustment Approach with an Application to the Investment Function for Turkey (1963-2017)" in Proceedings of International Conference of Eurasian Economies 2019, pp.289-293, Famagusta, Turkish Republic of Northern Cyprus.
DOI: https://doi.org/10.36880/C11.02351
Session 1C: Para ve Bankacılık
