Abstract:

Debt is an important source of government funding in developed and developing countries. In developed countries, debt is an important source of money to bridge the gap between government revenues and expenditures. In this study, the effects of public debt and inflation rate on unemployment in Turkiye for the 1998-2020 period were examined. Autoregressive Distributive Lag model (ARDL) Error Correction Model (ECM) was used to measure the effect of external debt stock, domestic debt amount and inflation rate on unemployment. Unit root tests and Granger causality tests were also applied to test the effectiveness and predictive ability of the model. According to the findings obtained from the study, it shows that the public debt and inflation have adverse effects on unemployment in Turkiye. This means that public debt and inflation reduce unemployment in Turkiye. However, inflation reduces unemployment more than domestic debt. On the other hand, it has been determined that the external debt stock has the same effect on unemployment. In other words, it means that the external debt stock will increase unemployment in Turkiye. In the perspective of the results of the analysis, it should mean that policy makers should be very careful about borrowing (especially external debt) by looking at its effects on unemployment in Turkiye. Turkiye's rush to accumulate external debt should be done very carefully; The government should seek the advice of experts on this crucial issue before continuing to accumulate external debt.

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