The Relationship Between Inflation and Unemployment: An Empirical Study for Turkey

AyÅŸin BUYRUKOÄžLU and Åžehnaz ALTUNAKAR Mercan

Fiscaoeconomia, 2022, issue 3

Abstract: The relationship between inflation and unemployment was first put forward in 1958 by Phillips, who found a negative relationship between unemployment and money wage growth in England. Proponents of this hypothesis argue that there is a rate of change between inflation and unemployment that can be used to reduce the unemployment rate.This article examines the relationship between unemployment and inflation in the Turkish economy using monthly data from May 2009 to November 2021. The stationarities of the variables were examined using Augmented Dicky-Fuller and Phillips-Perron tests, and then the Zivot-Andrews unit root test, which was developed in line with the criticism that traditional unit root tests did not take into account structural breaks, was also applied. Since only two variables were involved in the study, the Engle-Granger cointegration test was applied to reveal whether the series moved together.As a result of the analysis, it was concluded that there is a cointegration relationship between the variables and that there is a causal relationship from inflation to unemployment, that the Phillips Curve is valid for the period 2009M05 –2021M11 in Turkey and that a 1% increase in inflation provides a 2.6% decrease in unemployment. has been reached.

Keywords: Phillips Curve; Turkey; Cointegration Analysis; Granger Causality Test (search for similar items in EconPapers)
JEL-codes: C22 C58 E31 J64 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:fis:journl:220326

DOI: 10.25295/fsecon.1115116

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