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Labor Market Hysteresis and Turkish New Keynesian Phillips Curve (NKPC) (2000-2012)

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  • Leyla Baştav

Abstract

The study aims to analyze Turkish economy for the period 2000-2012 with emphasis on hysteresis mechanism in labor markets. New Keynesian (NK) framework has natural rate (or Non Accelerating Inflation Rate of Unemploymet - NAIRU) vs alternative theory of hysteresis as explanations for employment patterns. Of the four empirical research one reveals presence of hysteresis in Turkey for the term 1950-1995, whereas two of the remaining three studies for 1980-2011 also provide supporting evidence. In this study NKPC is estimated with labor market variables and additionally PC is estimated in output gap format by OLS. Although labor market equations are inconclusive due to presence of hysteresis, output gap NKPC provides some hinting evidence. This finding is also supported by statistical data analysis on employment, unemployment series and further by analysis on turnover in labor markets and long term unemployment. Hysteresis in Turkey seems to be result of business cycles in the economy (or economic shocks) rather than labor market characteristics, which can be overcome by demand management policies. Labor market and output gap equations in the study should be reestimated in the New Keynesian Wage Phillips Curve (NKWPC) format when wage series becomes available. [1]Only then a better vision will have been obtained on labor market dynamics. On macroeconomic field there is insufficient empirical evidence on dynamics of hysteresis to reach a firm theoretical background . This study may add some information to the relevance of business cycles and recessions for presence of persistent unemployment. See above See above

Suggested Citation

  • Leyla Baştav, 2013. "Labor Market Hysteresis and Turkish New Keynesian Phillips Curve (NKPC) (2000-2012)," EcoMod2013 6202, EcoMod.
    • Handle: RePEc:ekd:004912:6202
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    Keywords

    Turkey; Labor market issues; Labor market issues;
    All these keywords.

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