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Macroeconomic Policy and Unemployment by Economic Activity: Evidence from Turkey

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Author Info

  • Hakan Berument

    ()
    (Department of Economics, Bilkent)

  • Nukhet Dogan

    ()
    (Department of Econometrics, Gazi University)

  • Aysit Tansel

    ()
    (Department of Economics, METU)

Abstract

This paper investigates how macroeconomic policy shocks in Turkey affect the total unemployment and provides evidence on the differential responses of the unemployment by sectors of economic activity. Our paper extends the previous work in two respects. First, we consider not only the response of total unemployment but also the response of unemployment by sectors of economic activity. Second, we consider not only the effect of monetary policy shocks, but also the effects of several other macroeconomic shocks. The quarterly data used which covers the period 1988:01 to 2004:04 from Turkey. A VAR model with a recursive order is employed to estimate the effects of shocks in real GDP, price, exchange rate, interbank interest rate, money supply and own sectoral unemployment on unemployment by sectors of economic activity. The results indicate that the positive income shock is followed by a decrease in unemployment in all economic activity groups during the initial periods except the unemployment in the Electricity sector and the Community Services sector. A positive money shock decreases unemployment in sectors of Mining, Manufacturing, Construction, Wholesale-Retail Trade, Transportation and, Finance-Insurance. Opposite results are obtained with the interbank interest rate shocks. Even if, they are not statistically significant, a positive interbank interest rate shock increases the unemployment in all economic activities at the initial levels but derives down the unemployment in the Agriculture and the Community Services sectors at the initial level. Moreover, a positive price shock increases unemployment in all economic sectors in the long run except the Mining and the Community Services. Thus, unemployment in different sectors of economic activity respond differently to various macroeconomic policy shocks.

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File URL: http://www.erc.metu.edu.tr/menu/series08/0803.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by ERC - Economic Research Center, Middle East Technical University in its series ERC Working Papers with number 0803.

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Length: 27 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:met:wpaper:0803

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Keywords: Macroeconomic Policy Shocks; Unemployment by Economic Activity;

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References

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Cited by:
  1. Ceyhun ELGİN & Tolga Umut KUZUBAŞ, 2012. "Wage-Productivity Gap in Turkish Manufacturing Sector," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 27(316), pages 09-31.
  2. Afsin Sahin & Aysit Tansel & M. Hakan Berument, 2013. "Output-Employment Relationship across Sectors: A Long- versus Short-Run Perspective," Koç University-TUSIAD Economic Research Forum Working Papers 1311, Koc University-TUSIAD Economic Research Forum.
  3. Hassan, Muhammad shahid & Wajid, Ayesha & Mamoon, Dawood, 2013. "Some non Price Factors that Fend off Unemployment in Pakistan," MPRA Paper 49365, University Library of Munich, Germany.
  4. 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.

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