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http://dx.doi.org/10.13106/jafeb.2021.vol8.no2.0065

Analysis of the Phillips Curve: An Assessment of Turkey  

NAR, Mehmet (Department of Economics. Faculty of Economics and Administrative Sciences, Artvin Coruh University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.2, 2021 , pp. 65-75 More about this Journal
Abstract
This study analyzes the validity of the Phillips curve with regards to Turkey. The existence and direction of the causality relationship (reason-outcome relationship) between unemployment and inflation is investigated using inflation and unemployment data for the period 1980-2019. Unit root tests were utilized to evaluate the stationarity of the series. In line with the Zivot-Andrews unit root test, which was developed in response to the criticism of the failure of studies that presented macro-variables like inflation to consider traditional unit root tests, in this research, the Engle-Granger cointegration test was implemented to check whether the series could perform a joint action, and, finally, the Granger causality relationship was explored. According to the results of the analysis, over the relevant period there was a single directional causality relationship from inflation toward unemployment in Turkey. The importance of this relationship at the 10% significance level indicates the existence of many different factors that affect inflation and unemployment. Given the existence of a cointegration and causality relationship between inflation and unemployment, it can be said that, in Turkey, the Phillips curve is valid for the period 1980-2019 and that an increase of 1% in inflation will reduce the unemployment rate by 0.028%.
Keywords
Macroeconomics; Phillips Curve; Inflation; Unemployment; Adaptive Expectations;
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