Unemployment, Exchange Rate and Exchange Rate Volatility Relation: Analysis for Turkey

Yıl 2020, Cilt: 10 Sayı: 1, 179 - 209, 30.06.2020

Gülsüm Akarsu

https://doi.org/10.18074/ckuiibfd.626327

Cited By: 1

Öz

By the previous studies, exchange rate
fluctuations have been considered to be an important factor affecting the real
sector of economies as economies have become more open. Most of the studies
focused on its trade impact, however, through different channels, exchange rate
movements can also influence the unemployment. This study aims to analyze the
effect of exchange rate and its volatility on unemployment for Turkey over the
period from 2005 to 2019 by using quarterly data. As a solution for possible endogeneity
problem, VAR analysis was performed. Results show that although exchange rate
fluctuations do not affect the unemployment, exchange rate volatility
significantly increases unemployment. Moreover, positive output shocks
contribute statistically significantly to the reduction of unemployment in line
with Okun’s Law. In conclusion, different policy measures should be employed to
reduce the exchange rate volatility or its effect on unemployment or both.  

Anahtar Kelimeler

Unemployment, Exchange rate, Exchange rate volatility, Turkey, VAR model, Structural breaks

Kaynakça

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