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An investigation on the natural rate of crime rates with Fourier panel unit root test in selected emerging economies

Gizem Uzuner (Department of Economics and Finance, Faculty of Economics, Administrative and Social Sciences, Istanbul Gelisim University, Istanbul, Turkey)
Bünyamin Fuat Yıldız (Department of Banking and Finance, Eastern Mediterranean University, Famagusta, Turkey)
Murat Anıl Mercan (Department of Economics, Faculty of Economics and Administrative Sciences, Yildiz Technical University, Istanbul, Turkey)
Wing-Keung Wong (Department of Finance, Asia University, Taichung, Taiwan) (Department of Medical Research, China Medical University Hospital, Taichung, Taiwan) (Department of Economics and Finance, The Hang Seng University of Hong Kong, Shatin, Hong Kong)

Kybernetes

ISSN: 0368-492X

Article publication date: 19 December 2022

44

Abstract

Purpose

The specific objective of the study is to investigate the presence of natural rate of crime rates in selected emerging economies by using panel unit roots. The majority of the literature examines the issue using conventional unit root tests in a country-specific context. Meanwhile, there is no panel unit root investigation has been undertaken considering both cross-sectional dependence (CD) and structural changes.

Design/methodology/approach

As a result, this study is to fill the aforementioned gap and validate the natural rate of crime rates for 10 countries by using a Fourier panel unit root test. The advantage of the test is that structural shifts are modelled as gradual or smooth changes with a Fourier approximation, and it also accounts cross-sectional dependency. Thus, the Fourier panel unit root test may have better performance in capturing potential changes in the nature of data.

Findings

The result of the conventional unit roots test shows evidence of the hysteresis effect in crime, as it stands does not adequately account for smooth transitions or breaks. On contrary, the Fourier panel unit root test confirms the natural rate hypothesis in crime rates. The present results highlight the detrimental effects of crime cannot be abated by short-run deterrence policies.

Originality/value

Contrary to previous studies, the theoretical implications of the study imply that the empirical models consider the dynamic nature of crime rates should account for natural rate properties instead of the hysteresis assumption.

Keywords

Citation

Uzuner, G., Yıldız, B.F., Mercan, M.A. and Wong, W.-K. (2022), "An investigation on the natural rate of crime rates with Fourier panel unit root test in selected emerging economies", Kybernetes, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/K-06-2022-0888

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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