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Relationship between oil prices, interest rate, and unemployment: Evidence from an emerging market

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  • Dogrul, H. Günsel
  • Soytas, Ugur

Abstract

While the interrelation between oil price changes, economic activity and employment is an important issue that has been studied mainly for developed countries, little attention has been devoted to inquiries on fluctuations in the price of crude oil and its impact on employment for small open economies. Adopting an efficiency wage model for equilibrium employment that does not require any assumptions regarding labor supply, this paper contributes to the literature by investigating the causality between unemployment and two input prices, namely energy (crude oil) and capital (real interest rate) in an emerging market, Turkey for the period 2005:01-2009:08. Applying a relatively new technique, the Toda-Yamamoto procedure, we find that the real price of oil and interest rate improve the forecasts of unemployment in the long run. This finding supports the hypothesis that labor is a substitute factor of production for capital and energy.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 6 (November)
Pages: 1523-1528

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Handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1523-1528

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Unemployment rate Real interest rate Oil price;

References

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Citations

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Cited by:
  1. Lin, Boqiang & Wesseh, Presley K. & Appiah, Michael Owusu, 2014. "Oil price fluctuation, volatility spillover and the Ghanaian equity market: Implication for portfolio management and hedging effectiveness," Energy Economics, Elsevier, vol. 42(C), pages 172-182.
  2. Taylan Taner Dogan, 2012. "Macroeconomic Variables and Unemployment: The Case of Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 2(1), pages 71-78.
  3. Filis, George & Degiannakis, Stavros & Floros, Christos, 2011. "Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 152-164, June.

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