THE RELATIONSHIP OF INFLATION, UNEMPLOYMENT, FINANCIAL DEVELOPMENT AND INCOME INEQUALITY IN TÜRKİYE
Abstract
This study aims to explore the impact of inflation and unemployment on income distribution in the Turkish context. Additionally, the study seeks to assess the applicability of the financial Kuznets curve in the context of financial development. To achieve these objectives, the research utilizes annual data spanning the years 1990 to 2021. The investigation employs standard and Fourier Augmented Dickey-Fuller (ADF) tests to ascertain the stationarity of variables, Fourier Engle-Granger (and Standard Engle-Granger) test to determine cointegration relationships, and FMOLS, DOLS, and CCR estimators for long-short-term coefficient estimation. The empirical results indicate that elevated levels of unemployment and inflation during the examined period are correlated with heightened income inequality in Türkiye. In contrast, the validity of the financial Kuznets curve is not supported by the data in the relevant timeframe. It's noteworthy that the simultaneous consideration of financial development, unemployment, and inflation variables for Türkiye, as well as the utilization of Fourier methods for analysis, contribute novel dimensions to the financial Kuznets curve literature. Therefore, both the variables employed in the Turkish context and the methodological findings presented in this study offer innovative insights to the field.
Keywords
Inflation, unemployment, Gini coefficient, financial development, Türkiye
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