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

Year 2020, Volume 7, Issue 1, 22 - 33, 30.03.2020
https://doi.org/10.17261/Pressacademia.2020.1178

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

References

  • Akay, H. K, Aklan, N. A., & Çınar, M. (2016). Türkiye Ekonomisinde Ekonomik Büyüme ve İşsizlik. Yönetim ve Ekonomi Araştırmaları Dergisi, 14(1), 209-226. DOI: 10.11611/JMER775
  • Arabaci, Ö. ,& Arabaci, R. Y. (2018). A Flexible Nonlinear Inference to Okun’s Law for Turkish Economy in the Last Decade. Panoeconomicus, 65(5), 569-586. DOI: 10.2298/PAN130913026A
  • Barışık, S., Çevik, E. İ., & Çevik, N. K. (2010). Türkiye’de Okun Yasası, Asimetri İlişkisi ve İstihdam Yaratmayan Büyüme: Markov-Switching Yaklaşımı. Maliye Dergisi, 159, 88-102.
  • Blanchard, O. J., & Summers, L. H. (1986). Hysteresis and The European Unemployment Problem. National Bureau of Economic Research Working Paper No. 1950. DOI: 10.3386/w1950
  • Caraiani, P. (2010). Bayesian Linear Estimation of Okun Coefficient for Romania: Sensitivity to Prior Distributions. The Romanian Economic Journal, 13(38), 53-65. DOI: 10.1556/AOecon.60.2010.1.5
  • Ceylan, S., & Şahin, B. Y. (2010). İşsizlik ve Ekonomik Büyüme İlişkisinde Asimetri. Doğuş Üniversitesi Dergisi, 11(2), 157-165. DOI: 10.31671/dogus.2019.159
  • Courtney, H.G. (1991). The Beveridge Curve and Okun’s Law: A Re-Examination of Fundamental Relationships in the United States. Ph.D. Thesis, Massachusetts Institute of Technology.
  • Cross, R. (2014). Unemployment: Natural Rate Epicycles or Hysteresis? European Journal of Economics and Economic Policies: Intervention, 11 (2), 136-148. DOI: 104337//EJEEP.2014.02.01
  • Çağlayan, E., & Saçaklı, İ. (2006). Satın Alma Gücü Paritesinin Geçerliliğinin Sıfır Frekansta Spektrum Tahmincisine Dayanan Birim Kök Testleri İle İncelenmesi. İktisadi ve İdari Bilimler Dergisi, 20(1), 122-137
  • Dickey, D.A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series With a Unit Root. Journal of the American Statistical Association. 74(366), 427-431. DOI: 10.2307/2286348.
  • Enders, W. (2004). Applied Econometric Time Series, Second Edition, United States of America: John Wiley & Sons,.
  • Engle, R., & Granger C. (1987). Cointegration and Error Correction Representation: Estimation and Testing. Econometrica. 55, 251-276. DOI: 10.2307/1913236
  • Erdoğan Çoşar, E., & Yavuz, A. A. (2019). Is There Asymmetry between GDP and Labor Market Variables in Turkey under Okun’s Law? Central Bank of the Republic of Turkey Working Paper No. 19/27.
  • Freeman, D. G. (2001). Panel Tests of Okun’s Law for Ten Industrial Countries. Economic Inquiry, 39(4), 511-523. DOI: 10.1093/ei/39.3.511
  • Granger, C.W., & Yoon, G. (2002). Hidden Cointegration. University of California, University of California Economics Working Paper No. 2002-02. DOI: 10.2139/ssrn.313831
  • Gujarati, D. (2015). Econometrics by Example (2nd ed.). London, United Kingdom: Macmillan International Higher Education.
  • Harris, R., & Silverstone, B. (2001). Testing for Asymmetry in Okun’s Law: Cross-country Comparison. Economics Bulletin, 5, 1-13.
  • Hatemi-J, A., & Irandoust, M. (2012). Asymmetric Interaction Between Government Spending and Terms of Trade Volatility: New Evidence from Hidden Cointegration Technique. Journal of Economic Studies. 39(3), 368-378.
  • Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control. 12(2-3), 231-254.
  • Johansen, S. & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration with Application to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210.
  • Johansen, S. (1996). Likelihood-based Inference in Cointegrated Vector Auto-regressive Models. 2nd ed. Oxford: Oxford University Press.
  • Kangasharju, A., Tavera, C., & Nijkamp, P. (2012). Regional Growth and Unemployment: The Validity of Okun’s Law for the Finnish Regions. Spatial Economic Analysis, 7(3), 381-395. DOI: 10.1080/17421772.2012.694141
  • Knotek, E. S. (2007). How Useful is Okun’s Law?. Economic Review-Federal Reserve Bank of Kansas City, 92(4), 73-103.
  • Koutroulis, A., Panagopoulos, Y., & Tsouma, E. (2016). Asymmetry in the Response of Unemployment to Output Changes in Greece: Evidence from Hidden Co-integration. The Journal of Economic Asymmetries, 13, 81-88. DOI: 10.1016/j.jeca.2016.03.003
  • Mert, M., & Çağlar, A.E. (2019). Eviews ve Gauss Uygulamalı Zaman Serileri Analizi. Ankara: Detay Yayıncılık.
  • Moosa, I. A. (1997). A Cross-Country Comparison of Okun’s Coefficient. Journal of Comparative Economics, 24(3), 335-356. DOI: 10.1006/jcec.1997.1433
  • OECD (2020), Unemployment rate (indicator). DOI: 10.1787/997c8750-en (Accessed on 12 January 2020)
  • Okun, A. M. (1962). Potential GNP: Its Measurement and Significance. Proceedings of the Business and Economics Statistics Section, American Statistical Association, 98-103.
  • Palombi, S., Perman, R., & Tavera, C. (2015). Regional Growth and Unemployment in the Medium Run: Asymmetric Cointegrated Okun’s Law for UK Regions. Applied Economics, 47(57), 6228-6238. DOI: 10.1080/00036846.2015.1068922
  • Phillips, P. C. B., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75(2), 335-346. DOI: 10.1093/biomet/75.2.335
  • Schorderet, Y. (2001). Revisiting Okun’s Law: An Hysteretic Perspective. University of California, San Diego.
  • Smith, G. (1975). Okun’s Law Revisited. Quarterly Review of Economics and Business,15, 37-53.
  • Sögner, L., & Stiassny, A. (2002). An Analysis on the Structural Stability of Okun’s Law - A Cross-country Study. Applied Economics, 14, 1775-1787. DOI: 10.1080/00036840210124180
  • Villaverde, J., & Maza, A. (2009). The Robustness of Okun’s Law in Spain, 1980–2004: Regional Evidence. Journal of Policy Modeling, 31(2), 289-297. DOI: 10.1016/j.jpolmod.2008.09.003
  • Virén, M. (2001). The Okun Curve is Non-Linear. Economics Letters, 70, 253-57. DOI: 10.1016/S0165-1765(00)00370-0

Year 2020, Volume 7, Issue 1, 22 - 33, 30.03.2020
https://doi.org/10.17261/Pressacademia.2020.1178

Abstract

References

  • Akay, H. K, Aklan, N. A., & Çınar, M. (2016). Türkiye Ekonomisinde Ekonomik Büyüme ve İşsizlik. Yönetim ve Ekonomi Araştırmaları Dergisi, 14(1), 209-226. DOI: 10.11611/JMER775
  • Arabaci, Ö. ,& Arabaci, R. Y. (2018). A Flexible Nonlinear Inference to Okun’s Law for Turkish Economy in the Last Decade. Panoeconomicus, 65(5), 569-586. DOI: 10.2298/PAN130913026A
  • Barışık, S., Çevik, E. İ., & Çevik, N. K. (2010). Türkiye’de Okun Yasası, Asimetri İlişkisi ve İstihdam Yaratmayan Büyüme: Markov-Switching Yaklaşımı. Maliye Dergisi, 159, 88-102.
  • Blanchard, O. J., & Summers, L. H. (1986). Hysteresis and The European Unemployment Problem. National Bureau of Economic Research Working Paper No. 1950. DOI: 10.3386/w1950
  • Caraiani, P. (2010). Bayesian Linear Estimation of Okun Coefficient for Romania: Sensitivity to Prior Distributions. The Romanian Economic Journal, 13(38), 53-65. DOI: 10.1556/AOecon.60.2010.1.5
  • Ceylan, S., & Şahin, B. Y. (2010). İşsizlik ve Ekonomik Büyüme İlişkisinde Asimetri. Doğuş Üniversitesi Dergisi, 11(2), 157-165. DOI: 10.31671/dogus.2019.159
  • Courtney, H.G. (1991). The Beveridge Curve and Okun’s Law: A Re-Examination of Fundamental Relationships in the United States. Ph.D. Thesis, Massachusetts Institute of Technology.
  • Cross, R. (2014). Unemployment: Natural Rate Epicycles or Hysteresis? European Journal of Economics and Economic Policies: Intervention, 11 (2), 136-148. DOI: 104337//EJEEP.2014.02.01
  • Çağlayan, E., & Saçaklı, İ. (2006). Satın Alma Gücü Paritesinin Geçerliliğinin Sıfır Frekansta Spektrum Tahmincisine Dayanan Birim Kök Testleri İle İncelenmesi. İktisadi ve İdari Bilimler Dergisi, 20(1), 122-137
  • Dickey, D.A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series With a Unit Root. Journal of the American Statistical Association. 74(366), 427-431. DOI: 10.2307/2286348.
  • Enders, W. (2004). Applied Econometric Time Series, Second Edition, United States of America: John Wiley & Sons,.
  • Engle, R., & Granger C. (1987). Cointegration and Error Correction Representation: Estimation and Testing. Econometrica. 55, 251-276. DOI: 10.2307/1913236
  • Erdoğan Çoşar, E., & Yavuz, A. A. (2019). Is There Asymmetry between GDP and Labor Market Variables in Turkey under Okun’s Law? Central Bank of the Republic of Turkey Working Paper No. 19/27.
  • Freeman, D. G. (2001). Panel Tests of Okun’s Law for Ten Industrial Countries. Economic Inquiry, 39(4), 511-523. DOI: 10.1093/ei/39.3.511
  • Granger, C.W., & Yoon, G. (2002). Hidden Cointegration. University of California, University of California Economics Working Paper No. 2002-02. DOI: 10.2139/ssrn.313831
  • Gujarati, D. (2015). Econometrics by Example (2nd ed.). London, United Kingdom: Macmillan International Higher Education.
  • Harris, R., & Silverstone, B. (2001). Testing for Asymmetry in Okun’s Law: Cross-country Comparison. Economics Bulletin, 5, 1-13.
  • Hatemi-J, A., & Irandoust, M. (2012). Asymmetric Interaction Between Government Spending and Terms of Trade Volatility: New Evidence from Hidden Cointegration Technique. Journal of Economic Studies. 39(3), 368-378.
  • Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control. 12(2-3), 231-254.
  • Johansen, S. & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration with Application to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210.
  • Johansen, S. (1996). Likelihood-based Inference in Cointegrated Vector Auto-regressive Models. 2nd ed. Oxford: Oxford University Press.
  • Kangasharju, A., Tavera, C., & Nijkamp, P. (2012). Regional Growth and Unemployment: The Validity of Okun’s Law for the Finnish Regions. Spatial Economic Analysis, 7(3), 381-395. DOI: 10.1080/17421772.2012.694141
  • Knotek, E. S. (2007). How Useful is Okun’s Law?. Economic Review-Federal Reserve Bank of Kansas City, 92(4), 73-103.
  • Koutroulis, A., Panagopoulos, Y., & Tsouma, E. (2016). Asymmetry in the Response of Unemployment to Output Changes in Greece: Evidence from Hidden Co-integration. The Journal of Economic Asymmetries, 13, 81-88. DOI: 10.1016/j.jeca.2016.03.003
  • Mert, M., & Çağlar, A.E. (2019). Eviews ve Gauss Uygulamalı Zaman Serileri Analizi. Ankara: Detay Yayıncılık.
  • Moosa, I. A. (1997). A Cross-Country Comparison of Okun’s Coefficient. Journal of Comparative Economics, 24(3), 335-356. DOI: 10.1006/jcec.1997.1433
  • OECD (2020), Unemployment rate (indicator). DOI: 10.1787/997c8750-en (Accessed on 12 January 2020)
  • Okun, A. M. (1962). Potential GNP: Its Measurement and Significance. Proceedings of the Business and Economics Statistics Section, American Statistical Association, 98-103.
  • Palombi, S., Perman, R., & Tavera, C. (2015). Regional Growth and Unemployment in the Medium Run: Asymmetric Cointegrated Okun’s Law for UK Regions. Applied Economics, 47(57), 6228-6238. DOI: 10.1080/00036846.2015.1068922
  • Phillips, P. C. B., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75(2), 335-346. DOI: 10.1093/biomet/75.2.335
  • Schorderet, Y. (2001). Revisiting Okun’s Law: An Hysteretic Perspective. University of California, San Diego.
  • Smith, G. (1975). Okun’s Law Revisited. Quarterly Review of Economics and Business,15, 37-53.
  • Sögner, L., & Stiassny, A. (2002). An Analysis on the Structural Stability of Okun’s Law - A Cross-country Study. Applied Economics, 14, 1775-1787. DOI: 10.1080/00036840210124180
  • Villaverde, J., & Maza, A. (2009). The Robustness of Okun’s Law in Spain, 1980–2004: Regional Evidence. Journal of Policy Modeling, 31(2), 289-297. DOI: 10.1016/j.jpolmod.2008.09.003
  • Virén, M. (2001). The Okun Curve is Non-Linear. Economics Letters, 70, 253-57. DOI: 10.1016/S0165-1765(00)00370-0

Details

Primary Language English
Subjects Management, Business Finance
Journal Section Articles
Authors

Semra BOGA This is me (Primary Author)
Alparslan Türkeş Science and Technology University
0000-0003-2799-9080
Türkiye

Publication Date March 30, 2020
Published in Issue Year 2020, Volume 7, Issue 1

Cite

APA Boga, S. (2020). INVESTIGATING THE ASYMMETRY BETWEEN ECONOMIC GROWTH AND UNEMPLOYMENT IN TURKEY: A HIDDEN COINTEGRATION APPROACH . Journal of Economics Finance and Accounting , 7 (1) , 22-33 . DOI: 10.17261/Pressacademia.2020.1178

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