Abstract:

One of the key macroeconomic objectives for policy makers is the increase in employment and sustainable economic growth. The most effective policy in reducing unemployment is the increase in economic growth. Therefore, the proper analysis of the relationship between unemployment and economic growth is a guiding feature for policy makers. In this study, the relationship between economic growth and unemployment in Turkey was studied as empirical for the period 2000-2018 in the framework of the Okun Act. It has been tested with linear and non-linear models whether the Okun Act applies to the Turkish economy. According to the results of the analysis, the relationship between unemployment and growth is not in linear structure and the two-regime Markov regime Change model has given more successful results in representing the data. The results of the Markov regime Change model reveal the existence of a reverse relationship between the unemployment rates and the economic growth rates for both regimes. However, the unemployment rate is estimated to be reduced by 1 per cent and economic growth performance should be achieved by 14.5 per cent per year during crisis periods and by 8.3 per cent in normal periods.

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