Asymmetric Behavior of Unemployment Analysis with Regime Switching Models in Turkey

Tayfur Bayat (), Selim Kayhan and Ali Kocyigit
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Tayfur Bayat: Inonu University
Selim Kayhan: Bozok University
Ali Kocyigit: Inonu University

Business and Economics Research Journal, 2013, vol. 4, issue 2, 79

Abstract: In this study, asymmetric behavior of unemployment rate is investigated between years 1923 and 2011. In this regard, we employ linear unit root tests and Markov Switching model. According to unit root test results, unemployment rate data is not stationary in level, while the first difference of data is stationary. Markov switching analysis results indicate that the unemployment rate behaves asymmetrically between years 1923 and 1950, continuously. In the light of these results, it is understood that the structure of unemployment rate is nonlinear and it moves between two regimes. Another important result is that there are rigidities in unemployment rate after 50’s. The unemployment rate does not decrease below percentage 7 since 1974, except 1996, 1998 and 2000. In a manner of speaking, after it shifted to contraction regime, the unemployment rate keeps in this regime. In this concept, unemployment rate represents a downward rigidity between years 1950 and 2011.

Keywords: Unemployment rate; Unit root tests; BDS test; Nonlinearity; Markov switching model (search for similar items in EconPapers)
JEL-codes: C32 E24 J64 (search for similar items in EconPapers)
Date: 2013
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