IDEAS home Printed from https://ideas.repec.org/a/ahs/journl/v10y2025i1p1-26.html

The Dynamics of Output Gap Hysteresis in Türkiye

Author

Listed:
  • Koray YILDIRIM
  • Neşe ALGAN
  • Harun BAL

Abstract

The aim of this study is to identify the dynamics and hysteresis of the output gap. First, the existence of an output gap in the Turkish economy for the period 2005Q4:2021Q3 is determined using the Hodrick-Prescott and Baxter-King methods, and then the structural break procedure, which is widely used in the literature, is applied to detect hysteresis. The presence of a structural break supports the existence of hysteresis in the output gap. In addition, a structural VAR model is estimated with money supply, capacity utilization rate, and capital productivity variables as components of the output gap. While the empirical evidence points to the role of capacity utilization and productivity variables in explaining hysteresis, capacity utilization shocks are relatively stronger determinants of output gap hysteresis. For future studies, the effect of money supply on capacity utilization and productivity, labor productivity, etc., should be monitored. The novelty of the study is the modeling of hysteresis in a structure that includes demand-side and supply-side components. This innovation allows it to act as a guide for policymaking by taking into account the dynamic conditions appropriate to the nature of hysteresis beyond the static situation, such as the detection of hysteresis in the literature.

Suggested Citation

  • Koray YILDIRIM & Neşe ALGAN & Harun BAL, 2025. "The Dynamics of Output Gap Hysteresis in Türkiye," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 10(1), pages 1-26.
    • Handle: RePEc:ahs:journl:v:10:y:2025:i:1:p:1-26
    DOI: https://doi.org/10.30784/epfad.1576481
    as

    Download full text from publisher

    File URL: https://dergipark.org.tr/tr/download/article-file/4327664
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.30784/epfad.1576481?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Benjamin Wong, 2017. "Historical Decompositions for Nonlinear Vector Autoregression Models," CAMA Working Papers 2017-62, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Sushant Acharya & Julien Bengui & Keshav Dogra & Shu Lin Wee, 2022. "Slow Recoveries and Unemployment Traps: Monetary Policy in a Time of Hysteresis," The Economic Journal, Royal Economic Society, vol. 132(646), pages 2007-2047.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Consolo, Agostino & Koester, Gerrit & Nickel, Christiane & Porqueddu, Mario & Smets, Frank, 2021. "The need for an inflation buffer in the ECB’s price stability objective – the role of nominal rigidities and inflation differentials," Occasional Paper Series 279, European Central Bank.
    2. Garga, Vaishali & Singh, Sanjay R., 2021. "Output hysteresis and optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 871-886.
    3. Felipe Alves & Giovanni L. Violante, 2024. "From Micro to Macro Hysteresis: Long-Run Effects of Monetary Policy," Staff Working Papers 24-39, Bank of Canada.
    4. Gabriel Rodriguez & Paul Castillo B. & Junior A. Ojeda Cunya, 2024. "Time-Varying Effects of External Shocks on Macroeconomic Fluctuations in Peru: An Empirical Application using TVP-VAR-SV Models," Open Economies Review, Springer, vol. 35(5), pages 1015-1050, November.
    5. Abbritti, Mirko & Consolo, Agostino & Weber, Sebastian, 2021. "Endogenous growth, downward wage rigidity and optimal inflation," Working Paper Series 2635, European Central Bank.
    6. Atems, Bebonchu & Mette, Jehu & Lin, Guoyu & Madraki, Golshan, 2023. "Estimating and forecasting the impact of nonrenewable energy prices on US renewable energy consumption," Energy Policy, Elsevier, vol. 173(C).
    7. Salha Ben Salem & Sonia Sayari & Moez Labidi, 2024. "Effect of Financial Frictions on Monetary Policy Conduct: A Comparative Analysis of DSGE Models with and without Financial Frictions," Economies, MDPI, vol. 12(3), pages 1-16, March.
    8. Lofaro, Antonino & Di Bucchianico, Stefano, 2025. "Impact of monetary policy on functional income distribution: A panel vector autoregressive analysis," Economic Modelling, Elsevier, vol. 151(C).
    9. Cecion, Martina & Coenen, Günter & Gerke, Rafael & Le Bihan, Hervé & Motto, Roberto & Aguilar, Pablo & Ajevskis, Viktors & Giesen, Sebastian & Albertazzi, Ugo & Gilbert, Niels & Al-Haschimi, Alexander, 2021. "The ECB’s price stability framework: past experience, and current and future challenges," Occasional Paper Series 269, European Central Bank.
    10. Alvarado, Mauricio & Rodríguez, Gabriel, 2025. "Time-varying effects of financial uncertainty shocks on macroeconomic fluctuations in Peru," Journal of International Money and Finance, Elsevier, vol. 152(C).
    11. Jiménez, Alvaro & Rodríguez, Gabriel & Ataurima Arellano, Miguel, 2023. "Time-varying impact of fiscal shocks over GDP growth in Peru: An empirical application using hybrid TVP-VAR-SV models," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 314-332.
    12. Wolfgang Lechthaler & Mewael F. Tesfaselassie, 2023. "Endogenous Growth, Skill Obsolescence, and Output Hysteresis in a New Keynesian Model with Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(8), pages 2187-2213, December.
    13. He, Chao & Fan, Xiaodong, 2024. "The paradox of search intensity," Journal of Economic Theory, Elsevier, vol. 221(C).
    14. Sohei Kaihatsu & Shogo Nakano & Hiroki Yamamoto, 2024. "Macroeconomic Impact of Shifts in Long-term Inflation Expectations," Bank of Japan Working Paper Series 24-E-18, Bank of Japan.
    15. Yumeng Gu & Sanjay R. Singh, 2024. "Distribution of Market Power, Endogenous Growth, and Monetary Policy," Working Paper Series 2024-09, Federal Reserve Bank of San Francisco.
    16. Lechthaler, Wolfgang & Tesfaselassie, Mewael F., 2021. "Endogenous growth, skill obsolescence and fiscal multipliers," Kiel Working Papers 2184, Kiel Institute for the World Economy.
    17. Potter, Tristan, 2024. "Destabilizing search technology," Journal of Monetary Economics, Elsevier, vol. 145(C).
    18. Hie Joo Ahn & Yunjong Eo, 2025. "Hysteresis and the Role of Downward Nominal Wage Rigidity: Evidence from U.S. States," Finance and Economics Discussion Series 2025-062r1, Board of Governors of the Federal Reserve System (U.S.), revised 16 Dec 2025.
    19. Knotek, Edward S. & Zaman, Saeed, 2021. "Asymmetric responses of consumer spending to energy prices: A threshold VAR approach," Energy Economics, Elsevier, vol. 95(C).
    20. Koray Yıldırım & Neşe Algan & Harun Bal, 2026. "Hysteresis in Unemployment: An Empirical Examination for the Turkish Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(2), pages 4233-4278, April.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ahs:journl:v:10:y:2025:i:1:p:1-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ersan Ersoy (email available below). General contact details of provider: https://epfjournal.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.