THE INFLUENCE OF FISCAL POLICY ON UNEMPLOYMENT RATE IN TÜRKİYE

Yıl 2023, Cilt: 21 Sayı: 3, 58 - 72, 14.10.2023

Sevgi Coskun Yılmaz

https://doi.org/10.11611/yead.1316839

Öz

In the context of ongoing economic discussion, the connection between government actions and economic performance remains an important issue. There exist diverse opinions and arguments regarding how fiscal policy affects the unemployment rate from both empirical and theoretical perspective. The objective of this research is to explore the response of unemployment rate to fiscal policy shocks, namely government expenditure and tax revenue shocks. To achieve this goal, we gather annual data spanning from 1990 to 2021 for Türkiye employing recursive Structural VAR model. The results show that a tax revenue shock, corresponding to a one standard deviation change, initially results in a temporary decline in the unemployment but it positively affects the unemployment rate in the long run. Furthermore, the reaction of the unemployment to a government spending shock follows a hump-shape pattern. Hence, we can conclude that the government expenditure shock increases unemployment rate temporarily but decreases it slightly over the long term.

Anahtar Kelimeler

Unemployment, Fiscal policy, Recursive Structural VAR

Kaynakça

• Blanchard, O. and Perotti, R. (2002) “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output”, Quarterly Journal of Economics, Vol. 117(4), pp. 1329- 1368.
• Bassanini, A. and Duval, R. (2006) “Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions”, OECD Economics Department Working Papers, No. 486.
• Bassanini, A. and Duval, R. (2007) “The Determinants of Unemployment Across OECD Countries: Reassessing the Role of Policies and Institutions”, OECD Economic Studies, 2006(1), 7-86.
• Berument, H., Dogan, N., and Tansel, A. (2006) “Economic Performance and Unemployment: Evidence From an Emerging Economy”, International Journal of Manpower, 604-623.
• Bova, E., Kolerus, C. and Tapsoba, S. J. (2015) “A Fiscal Job? An Analysis of Fiscal Policy and the Labor Market”, IZA Journal of Labor Policy, 4, 1-17.
• Burnside, C., Eichenbaum, M. and Fisher, J. D. (2004) “Fiscal Shocks and Their Consequences”, Journal of Economic theory, 115(1), 89-117.
• Buyukbasaran, T., Cebi, C and Yilmaz, E. (2019) “Interaction of Monetary and Fiscal Policies in Turkey”, Working Papers 1935, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
• Caldara, D. and Kamps, C. (2008) “What are the Effects of Fiscal Policy Shocks? A VAR-based Comparative Analysis”, Working Paper Series 877, European Central Bank.
• Cavallo, M. P. (2005) “Government Employment and the Dynamic Effects of Fiscal Policy Shocks”, Federal Reserve Bank of San Francisco.
• Cebi, C. and Culha, A. A. (2013) “The Effects of Government Spending Shocks on the Real Exchange Rate and Trade Balance in Turkey”, Working Papers 1337, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
• Fatás, A., and Mihov, I. (2001) “The Effects of Fiscal Policy on Consumption and Employment: Theory and Evidence”, CEPR Discussion Papers, no. 2760.
• Galí, J., López-Salido, J.D. and Vallés, J. (2007) “Understanding the Effects of Government Spending on Consumption”, Journal of the European Economic Association, MIT Press, vol. 5(1), pages 227-270.
• Hjelm, G. and Stockhammar, P. (2016) “Short Run Effects of Fiscal Policy on GDP and Employment: Swedish Evidence”, Working Papers 147, National Institute of Economic Research.
• Kuo, C. H. and Miyamoto, H. (2019) “Fiscal Stimulus and Unemployment Dynamics”, The B.E. Journal of Macroeconomics (Contributions Tier), vol. 19 (2).
• Murwirapachena, G., Maredza, A. and Choga, I. (2013) “The Economic Determinants of Budget Deficits in South Africa”, Mediterranean Journal of Social Sciences, 4(13), 561.
• Monacelli, T., Perotti, R. and Trigari, A. (2010) “Unemployment Fiscal Multipliers”, NBER Working Papers 15931, National Bureau of Economic Research, Inc.
• Nickell, S. (1997) “Unemployment and Labor Market Rigidities: Europe versus North America”, The Journal of Economic Perspectives, Vol. 11, No. 3.
• Nunziata, L. (2002) “Unemployment, Labour Market Institutions and Shocks”, Nuffield College Working Papers in Economics 2002-W16.
• Omran, E. A. M., and Bilan, Y. (2020) “The Impact of Fiscal Policy on the Unemployment Rate in Egypt”, Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(4), pages 199-209.
• Pappa, E. (2009) “The Effects of Fiscal Shocks on Employment and the Real Wage”, International Economic Review, 50(1), 217–244.
• Pata, U. K. (2020) “OECD Ülkelerinde İşsizlik Histerisinin Ampirik Bir Analizi: Fourier Panel Durağanlık Testi”, SGD-Sosyal Güvenlik Dergisi, 10(1), 125-144.
• Pettersson-Lidbom, P. (2008) “Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach” Journal of the European Economic Association, 6(5), 1037-1056.
• Saraireh, S. (2020) “The Impact of Government Expenditures on Unemployment: A Case Study of Jordan”, Asian Journal of Economic Modelling, 8(3), 189-203.
• Tagkalakis, A. O. (2013) “The Unemployment Effects of Fiscal Policy: Recent Evidence from Greece” IZA Journal of European Labor Studies, 2, 1-32.
• Uhlig, H. (2005) “What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure”, Journal of Monetary Economics, 52 (2):381.419.
• Ünal, U. (2015) “The Unemployment Effects of Fiscal Policy in Netherlands”, Suleyman Demirel University, The Journal of Faculty of Economics and Administrative Sciences, Vol. 20, Issue: 1, pp. 143-153
• Yousef, E. M. A. (2023) “The Impact of Fiscal Policy Tools on Unemployment Rates in Jordan: Autoregressive Distributed Lag Approach", Jordan Journal of Economic Sciences, 10(1), 1-15.