The Relationship between unemployment rate and growth: time series approach for Turkey

Akpiliç, Ferdi
This study analyzes the relationship of economic growth and unemployment by using quarterly data for the period 2005:Q1-2016:Q1 for Turkish Economy. Three different versions of Okun’s law which are difference, gap and dynamic versions are investigated in the study. According to results, it is found that Okun’s Law is valid for Turkey. In addition, productivity variable is added to dynamic models to test effect of productivity on unemployment rate and models results reveal positive relationship between productivity and unemployment rate. Then the rate of output growth consistent with a stable unemployment rate in Turkey is calculated by using each versions of Okun’s Law. Growth rate to keep unemployment rate stable is calculated as 3.57 percent for difference model, 4.15 percent for dynamic model and 3.87 percent for dynamic model including productivity. In addition, the short term relationship between growth and unemployment rate is examined by using vector autoregressive model (VAR) and Granger Causality test. According to results, it is found that there is a short run relationship between GDP and unemployment rate. Even though GDP Granger cause unemployment rate, unemployment rate does not Granger cause GDP.


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Citation Formats
F. Akpiliç, “The Relationship between unemployment rate and growth: time series approach for Turkey,” M.S. - Master of Science, Middle East Technical University, 2016.