CYCLICAL OUTPUT - UNEMPLOYMENT RELATIONSHIP: OKUN’S LAW PARAMETER FOR TURKEY

Year 2017, Volume: 6 Issue: 1, 1 - 14, 01.03.2017

Ahmet Tiryaki Obid Khakimov

Abstract

The aim of this paper is
twofold; to analyze the Okun’s law for Turkey and whether there exists a
structural change in the relationship between cyclical output and unemployment
after 2001 financial and economic crisis by using quarterly data from 1993 to
end of 2008. Based on its “gap” specification and using different filtering
methods-HP filter 1997,  Baxter-King
1995, and Unobserved Component Model,-different than the previous literature,
the results show that there exists significant inverse relationship between
unemployment and output for Turkey. However, the quantitative value of Okun’s coefficient
is relatively bigger than the developed countries’ coefficient reported by
original papers for whole period. Also, the claim about the Turkish cyclical
output and unemployment faced structural change after 2001 crisis did not find
any empirical support.

Keywords

Okun’s law; Unemployment gap; Output gap; HP Filter; Turkey

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