Does Economic Growth Have a Nonlinear Relationship with Unemployment in Türkiye? Evidence From Self-Exciting Threshold Autoregressive Model

Abstract

Economic growth and employment have long been a source of concern for economists and policymakers. Okun, an American economist, was the first to examine the relationship between economic growth and unemployment. Okun’s law states that a 3% increase in output results in a 1% drop in unemployment. The main objective of this paper is to examine this hypothesis for Turkish economy by using quarterly data from 2001 to 2023. The relationship between the unemployment and economic growth has been analyzed by employing Granger causality test and self-exciting threshold autoregressive (SETAR) model. According to SETAR findings, there exists a threshold value binding in describing the relationship between unemployment and economic growth. As a result, Okun's Law is applicable to Türkiye.