INVESTIGATING THE ASYMMETRY BETWEEN ECONOMIC GROWTH AND UNEMPLOYMENT IN TURKEY: A HIDDEN COINTEGRATION APPROACH

Abstract

Purpose- The purpose of this study is to investigate whether there is an asymmetric relationship between economic growth and unemployment in Turkey. Methodology- In assessing this relationship, quarterly unemployment rate and GDP data for the period between 2000-2019 were examined. Assessment of the relationship between these variables (aggregate values) was first analyzed using a Johansen cointegration test based on a system approach. While no evidence of a cointegration relationship was found, the possibility of a hidden cointegration was assessed and these variables were decomposed into positive and negative values as suggested by Granger and Yoon (2002). The asymmetric causality relationship between these variables was then evaluated using the decomposition process approach suggested by Hatemi-J and Irandoust (2012) approach. Findings- The results of this research demonstrate an asymmetric cointegration and an asymmetric one-way causality relationship between these variables. Conclusion- The fact that the unemployment that emerged during the contraction periods of the economy did not recover even after the economy transitioned to an expansion phase demonstrates the critical importance of the economic policies that should be implemented in times of crisis

Keywords

• Okun's Law,unemployment,economic growth,hidden cointegration,asymmetry

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