The Relationship Between Unemployment and Economic Output: An Examination of The Okun Law For Turkey

Abstract

Unemployment is the situation in which people who can work in the country and want to work at the current wage level cannot find a job. Unemployment includes only voluntary unemployment out of voluntary and unemployment situations. Unemployment is a problem that can not be solved in Turkey's economy. Governments have implemented various policies to find a solution to this problem. Unemployment and economic growth have been constantly explored. In this study, annual data for the period 1990-2019 were used. Regression analysis was performed to find the short-term coefficient with unemployment and growth data, which were found to be stable at the level according to the unit root test results. As a result of the regression analysis, it was seen that unemployment decreased by 0.07 per unit change for the short term. Okun's Law has reached the current results for Turkey. Suitable lag length for VAR model has been found to be 0 (zero). Looking at the Granger causality test, no causality relationship between variables was found. The relationship between unemployment and growth was tested by regression analysis. No causality between unemployment and growth has been found.