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RETHINKING THE PHILLIPS CURVE IN TÜRKİYE: NEW EVIDENCE FROM THE FREQUENCY DOMAIN

Year 2024, Volume: 9 Issue: 2, 107 - 114, 30.06.2024
https://doi.org/10.29106/fesa.1420002

Abstract

This study aims to investigate the short- and long-run relationship between the inflation rate, which has come to the fore after a long break all over the world, and the unemployment rate for the Turkish economy. For this purpose, the relationship between the two variables is analyzed using a causality test in the frequency domain, with monthly data for the period 2005:01-2023:03. The symmetric findings of the test indicate the existence of a unidirectional and short-run causal relationship from unemployment to inflation. The asymmetric findings of the test provide two important pieces of evidence. The first of these is the existence of a unidirectional and long-run causal relationship from the positive component of unemployment to the negative component of inflation. The second is the existence of a unidirectional, short- and long-run causal relationship from the negative component of unemployment to the positive component of inflation. These findings confirm the trade-off predicted by the Phillips Curve. It is also important for policymakers to try to increase productivity by making structural and institutional reforms in the labor market, as far as settling for a moderate inflation rate while struggling with inflation and unemployment problems.

References

  • ABU, N. (2019). Inflation and unemployment trade-off: A re-examination of the Phillips Curve and its stability in Nigeria. Contemporary Economics, 13(1), 21-34.
  • AKERLOF, G., DICKENS, W. T., & PERRY, G. L. (2000). Near-rational wage and price setting and the long-run Phillips curve. Brookings Papers on Economic Activity, 1, 1–60.
  • BHATTARAI, K. (2016). Unemployment–inflation trade-offs in OECD countries. Economic Modelling, 58, 93-103.
  • BOKHARI, A. A. (2020). The twinning of inflation and unemployment phenomena in Saudi Arabia: Phillips curve perspective. Contemporary Economics, 14(2), 254-271.
  • BREITUNG, J., & CANDELON, B. (2006). Testing for short-and long-run causality: A frequency-domain approach. Journal of Econometrics, 132(2), 363-378.
  • BUTHELEZI, E. M. (2023). Impact of inflation in different states of unemployment: evidence with the Phillips Curve in South Africa from 2008 to 2022. Economies, 11(1), 29.
  • DRITSAKI, C., & DRITSAKI, M. (2013). Phillips curve inflation and unemployment: an empirical research for Greece. International Journal of Computational Economics and Econometrics, 3(1-2), 27-42.
  • BILDIRICI, M., & OZAKSOY SONUSTUN, F. (2018). Backward bending structure of Phillips Curve in Japan, France, Turkey and the USA. Economic research-Ekonomska istraživanja, 31(1), 537-549.
  • FURUOKA, F. (2007). Does the “Phillips curve” really exist? New empirical evidence from Malaysia. Economics Bulletin, 5(16), 1-14.
  • GEWEKE, J. (1982). Measurement of linear dependence and feedback between multiple time series. Journal of the American Statistical Association, 77(378), 304-313.
  • GRANGER, C. (1969). Investigating causal relations by econometric models and cross-spectral methods, Econometrica, 37(3), 424-438.
  • HATEMI-J, A. (2012). Asymmetric causality tests with an application. Empirical economics, 43, 447-456.
  • HO, S. Y., & IYKE, B. N. (2019). Unemployment and inflation: Evidence of a nonlinear Phillips curve in the Eurozone. The Journal of Developing Areas, 53(4), 1-15.
  • HOSOYA, Y. (1991). The decomposition and measurement of the interdependency between second-order stationary processes. Probability theory and related fields, 88(4), 429-444.
  • KARAHAN, P., & ÇAĞLARIRMAK USLU, N. (2018). A dynamic analysis on the validity of the Phillips curve for Turkey. Finans Politik ve Ekonomik Yorumlar, (636), 89-99.
  • KORKMAZ, S., & ABDULLAZADE, M. (2020). The causal relationship between unemployment and inflation in G6 countries. Advances in Economics and Business, 8(5), 303-309.
  • KUŞTEPELI, Y. (2005). A comprehensive short-run analysis of a (possible) Turkish Phillips curve. Applied Economics, 37(5), 581-591.
  • NAQIBULLAH, H., RAHMATULLAH, P., ZMARAI, M., SAFIULLAH, S., & AHAD, Z. A. (2021). The long-run determinant of inflation in Malaysia: A Philips Curve review. European Journal of Molecular & Clinical Medicine, 7(11), 4550-4563.
  • PALLEY, T. (2003). The backward-bending Phillips Curve and the minimum unemployment rate of inflation: Wage adjustment with opportunistic firms. The Manchester School, 71(1), 1463–6786.
  • PÉREZ‐MONTIEL, J. A., & MANERA, C. (2022). Is autonomous demand really autonomous in the United States? An asymmetric frequency‐domain Granger causality approach. Metroeconomica, 73(1), 78-92.
  • PERRON, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80(2), 355-385.
  • PERRON, P., & VOGELSANG, T. J. (1992). Testing for a unit root in a time series with a changing mean: corrections and extensions. Journal of Business & Economic Statistics, 10(4), 467-470.
  • PETEK, A., & AYSU, Y. (2017). Philips Curve: Turkey case (1980-2015). Journal of Current Researches on Business and Economics, 7(1), 53-64.
  • PHILLIPS, P. C., & PERRON, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
  • QIN, Y. (2020). The relationship between unemployment and inflation--evidence from US economy. In Fifth International Conference on Economic and Business Management (FEBM 2020) (pp. 157-162). Atlantis Press.
  • RANJBAR, O., CHANG, T., NEL, E., & GUPTA, R. (2017). Energy consumption and economic growth nexus in South Africa: Asymmetric frequency domain approach. Energy sources, part b: Economics, Planning, and Policy, 12(1), 24-31.
  • SAHNOUN, M., & ABDENNADHER, C. (2019). Causality between inflation, economic growth and unemployment in North African countries. Economic Alternatives, 1, 77-92.
  • SAID, S. E., & DICKEY, D. A. (1984). Testing for unit roots in autoregressive-moving average models of unknown order. Biometrika, 71(3), 599-607.
  • SALIMINEZHAD, A., & BAHRAMIAN, P. (2020). Clean energy consumption and economic growth nexus: asymmetric time and frequency domain causality testing in China. Energy Sources, Part B: Economics, Planning, and Policy, 15(1), 1-12.
  • SAMUELSON, P. A., & SOLOW, R. M. (1960). Analytical aspects of anti-inflation policy. The American Economic Review, 50(2), 177-194.
  • SASONGKO, G., & HURUTA, A. D. (2019). The causality between inflation and unemployment: the Indonesian evidence. Business: Theory and Practice, 20, 1-10.
  • SASONGKO, G., HURUTA, A. D., & GULTOM, Y. N. V. (2019). Does the Phillips curve exist in Indonesia? A panel Granger causality model. Entrepreneurship and Sustainability Issues, 6(3), 1428-1443.
  • TURKISH STATISTICAL INSTITUTE (TURKSTAT). https://www.tuik.gov.tr/Home/Index
  • UMARU, A., DONGA, M., & MUSA, S. (2013). An empirical investigation into the effect of unemployment and inflation on economic growth in Nigeria. Interdisciplinary Journal of Research in Business, 2(12), 01-14.
  • VERMEULEN, J. C. (2017). Inflation and unemployment in South Africa: Is the Phillips curve still dead?. Southern African Business Review, 21(1), 20-54.
  • WULANDARI, D., UTOMO, S. H., NARMADITYA, B. S., & KAMALUDIN, M. (2019). Nexus between inflation and unemployment: Evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 6(2), 269-275.
  • YILDIRIM, K. (2019). İşsizlik ve Enflasyon. İçinde K. Yıldırım (Ed.), Makro Ekonomi, (s. 401-468). Ankara: Seçkin Yayıncılık.
  • YILDIZ, Ş. (2021). The analysis of the validity of the Phillips Curve in Turkey via the Fourier cointegration and causality rests. İnsan ve Toplum Bilimleri Araştırmaları Dergisi, 10(4), 3173-3190.
  • ZAMAN, K., KHAN, M. M., AHMAD, M., & IKRAM, W. (2011). Inflation, unemployment and the NAIRU in Pakistan (1975-2009). International Journal of Economics and Finance, 3(1), 245-254.

TÜRKİYE’DE PHILLIPS EĞRİSİNİ YENİDEN DÜŞÜNMEK: FREKANS ALANINDAN YENİ KANITLAR

Year 2024, Volume: 9 Issue: 2, 107 - 114, 30.06.2024
https://doi.org/10.29106/fesa.1420002

Abstract

Bu çalışma, tüm dünyada uzun bir aranın ardından yeniden gündeme gelen enflasyon oranı ile işsizlik oranı arasındaki kısa ve uzun dönemli ilişkiyi Türkiye ekonomisi için araştırmayı amaçlamaktadır. Bu amaç doğrultusunda, iki değişken arasındaki ilişki, 2005:01-2023:03 dönemine ait aylık bazda verilerle, frekans alanında nedensellik testi aracılığıyla analiz edilmiştir. Testin simetrik bulguları, işsizlikten enflasyona doğru tek yönlü ve kısa dönemli bir nedensellik ilişkisinin varlığına işaret etmektedir. Testin asimetrik bulguları ise iki önemli kanıt sağlamıştır. Bunlardan ilki, işsizliğin pozitif bileşeninden enflasyonun negatif bileşenine doğru tek yönlü ve uzun dönemli bir nedensellik ilişkisinin varlığıdır. İkincisi ise işsizliğin negatif bileşeninden enflasyonun pozitif bileşenine doğru tek yönlü ve kısa ve uzun dönemli bir nedensellik ilişkisinin varlığıdır. Bu bulgular, Phillips eğrisinin öngördüğü ödünleşimi doğrulamaktadır. Politika yapıcılar için enflasyon ve işsizlik sorunlarıyla mücadele ederlerken, makul bir enflasyona razı olmak kadar, işgücü piyasasında yapısal ve kurumsal reformlar yaparak verimliliği artırmaya çalışmak da önemlidir.

References

  • ABU, N. (2019). Inflation and unemployment trade-off: A re-examination of the Phillips Curve and its stability in Nigeria. Contemporary Economics, 13(1), 21-34.
  • AKERLOF, G., DICKENS, W. T., & PERRY, G. L. (2000). Near-rational wage and price setting and the long-run Phillips curve. Brookings Papers on Economic Activity, 1, 1–60.
  • BHATTARAI, K. (2016). Unemployment–inflation trade-offs in OECD countries. Economic Modelling, 58, 93-103.
  • BOKHARI, A. A. (2020). The twinning of inflation and unemployment phenomena in Saudi Arabia: Phillips curve perspective. Contemporary Economics, 14(2), 254-271.
  • BREITUNG, J., & CANDELON, B. (2006). Testing for short-and long-run causality: A frequency-domain approach. Journal of Econometrics, 132(2), 363-378.
  • BUTHELEZI, E. M. (2023). Impact of inflation in different states of unemployment: evidence with the Phillips Curve in South Africa from 2008 to 2022. Economies, 11(1), 29.
  • DRITSAKI, C., & DRITSAKI, M. (2013). Phillips curve inflation and unemployment: an empirical research for Greece. International Journal of Computational Economics and Econometrics, 3(1-2), 27-42.
  • BILDIRICI, M., & OZAKSOY SONUSTUN, F. (2018). Backward bending structure of Phillips Curve in Japan, France, Turkey and the USA. Economic research-Ekonomska istraživanja, 31(1), 537-549.
  • FURUOKA, F. (2007). Does the “Phillips curve” really exist? New empirical evidence from Malaysia. Economics Bulletin, 5(16), 1-14.
  • GEWEKE, J. (1982). Measurement of linear dependence and feedback between multiple time series. Journal of the American Statistical Association, 77(378), 304-313.
  • GRANGER, C. (1969). Investigating causal relations by econometric models and cross-spectral methods, Econometrica, 37(3), 424-438.
  • HATEMI-J, A. (2012). Asymmetric causality tests with an application. Empirical economics, 43, 447-456.
  • HO, S. Y., & IYKE, B. N. (2019). Unemployment and inflation: Evidence of a nonlinear Phillips curve in the Eurozone. The Journal of Developing Areas, 53(4), 1-15.
  • HOSOYA, Y. (1991). The decomposition and measurement of the interdependency between second-order stationary processes. Probability theory and related fields, 88(4), 429-444.
  • KARAHAN, P., & ÇAĞLARIRMAK USLU, N. (2018). A dynamic analysis on the validity of the Phillips curve for Turkey. Finans Politik ve Ekonomik Yorumlar, (636), 89-99.
  • KORKMAZ, S., & ABDULLAZADE, M. (2020). The causal relationship between unemployment and inflation in G6 countries. Advances in Economics and Business, 8(5), 303-309.
  • KUŞTEPELI, Y. (2005). A comprehensive short-run analysis of a (possible) Turkish Phillips curve. Applied Economics, 37(5), 581-591.
  • NAQIBULLAH, H., RAHMATULLAH, P., ZMARAI, M., SAFIULLAH, S., & AHAD, Z. A. (2021). The long-run determinant of inflation in Malaysia: A Philips Curve review. European Journal of Molecular & Clinical Medicine, 7(11), 4550-4563.
  • PALLEY, T. (2003). The backward-bending Phillips Curve and the minimum unemployment rate of inflation: Wage adjustment with opportunistic firms. The Manchester School, 71(1), 1463–6786.
  • PÉREZ‐MONTIEL, J. A., & MANERA, C. (2022). Is autonomous demand really autonomous in the United States? An asymmetric frequency‐domain Granger causality approach. Metroeconomica, 73(1), 78-92.
  • PERRON, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80(2), 355-385.
  • PERRON, P., & VOGELSANG, T. J. (1992). Testing for a unit root in a time series with a changing mean: corrections and extensions. Journal of Business & Economic Statistics, 10(4), 467-470.
  • PETEK, A., & AYSU, Y. (2017). Philips Curve: Turkey case (1980-2015). Journal of Current Researches on Business and Economics, 7(1), 53-64.
  • PHILLIPS, P. C., & PERRON, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
  • QIN, Y. (2020). The relationship between unemployment and inflation--evidence from US economy. In Fifth International Conference on Economic and Business Management (FEBM 2020) (pp. 157-162). Atlantis Press.
  • RANJBAR, O., CHANG, T., NEL, E., & GUPTA, R. (2017). Energy consumption and economic growth nexus in South Africa: Asymmetric frequency domain approach. Energy sources, part b: Economics, Planning, and Policy, 12(1), 24-31.
  • SAHNOUN, M., & ABDENNADHER, C. (2019). Causality between inflation, economic growth and unemployment in North African countries. Economic Alternatives, 1, 77-92.
  • SAID, S. E., & DICKEY, D. A. (1984). Testing for unit roots in autoregressive-moving average models of unknown order. Biometrika, 71(3), 599-607.
  • SALIMINEZHAD, A., & BAHRAMIAN, P. (2020). Clean energy consumption and economic growth nexus: asymmetric time and frequency domain causality testing in China. Energy Sources, Part B: Economics, Planning, and Policy, 15(1), 1-12.
  • SAMUELSON, P. A., & SOLOW, R. M. (1960). Analytical aspects of anti-inflation policy. The American Economic Review, 50(2), 177-194.
  • SASONGKO, G., & HURUTA, A. D. (2019). The causality between inflation and unemployment: the Indonesian evidence. Business: Theory and Practice, 20, 1-10.
  • SASONGKO, G., HURUTA, A. D., & GULTOM, Y. N. V. (2019). Does the Phillips curve exist in Indonesia? A panel Granger causality model. Entrepreneurship and Sustainability Issues, 6(3), 1428-1443.
  • TURKISH STATISTICAL INSTITUTE (TURKSTAT). https://www.tuik.gov.tr/Home/Index
  • UMARU, A., DONGA, M., & MUSA, S. (2013). An empirical investigation into the effect of unemployment and inflation on economic growth in Nigeria. Interdisciplinary Journal of Research in Business, 2(12), 01-14.
  • VERMEULEN, J. C. (2017). Inflation and unemployment in South Africa: Is the Phillips curve still dead?. Southern African Business Review, 21(1), 20-54.
  • WULANDARI, D., UTOMO, S. H., NARMADITYA, B. S., & KAMALUDIN, M. (2019). Nexus between inflation and unemployment: Evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 6(2), 269-275.
  • YILDIRIM, K. (2019). İşsizlik ve Enflasyon. İçinde K. Yıldırım (Ed.), Makro Ekonomi, (s. 401-468). Ankara: Seçkin Yayıncılık.
  • YILDIZ, Ş. (2021). The analysis of the validity of the Phillips Curve in Turkey via the Fourier cointegration and causality rests. İnsan ve Toplum Bilimleri Araştırmaları Dergisi, 10(4), 3173-3190.
  • ZAMAN, K., KHAN, M. M., AHMAD, M., & IKRAM, W. (2011). Inflation, unemployment and the NAIRU in Pakistan (1975-2009). International Journal of Economics and Finance, 3(1), 245-254.
There are 39 citations in total.

Details

Primary Language English
Subjects Macroeconomics (Other)
Journal Section Araştırma Makaleleri
Authors

Veysel Karagöl 0000-0001-9939-0173

Early Pub Date June 30, 2024
Publication Date June 30, 2024
Submission Date January 15, 2024
Acceptance Date April 25, 2024
Published in Issue Year 2024 Volume: 9 Issue: 2

Cite

APA Karagöl, V. (2024). RETHINKING THE PHILLIPS CURVE IN TÜRKİYE: NEW EVIDENCE FROM THE FREQUENCY DOMAIN. Finans Ekonomi Ve Sosyal Araştırmalar Dergisi, 9(2), 107-114. https://doi.org/10.29106/fesa.1420002