kahyaoğlu, hakan dokuz eylül üniversitesi - iibf - iktisat bölümü, turkey , tüzün, osman dokuz eylül üniversitesi - iibf - iktisat bölümü, turkey , ceylan, fatih dokuz eylül üniversitesi - iibf - iktisat bölümü, turkey , ekinci, ramazan dokuz eylül üniversitesi - iibf - iktisat bölümü, turkey

THE VALIDITY OF UNEMPLOYMENT HYSTERESIS: A CASEOF TURKEY AND SELECTED EU COUNTRIES

32676

There are two main hypotheses as to dynamic trends of unemployment in the literature. The first of these is the natural rate hypothesis put forth by Friedman (1968) and Phelps (1968), and the second proposition on unemployment is known as the “hysteresis” hypothesis. According to this latter hypothesis developed through the support of Blanchard and Summers (1986, 1987), Layard et al, (1991) and Barron (1988), the shocks have permanent effects on unemployment levels due to rigidities in the labor market. In other words, the unemployment rate tends to increase and does not get back to its previous level after a shock in the economy. This study examines the validity of unemployment hysteresis in the case of EU and Turkey by using quarterly data over the period 2001.Q1-2015.Q4, i) for each country with time-series, and ii) for selected EU countries with panel data analysis. Since the analysis incorporates both frequency and time dimensions, the existence of unemployment hysteresis is estimated by techniques based on Fourier-ADF and Fourier IPS approaches. According to the findings of the study, unemployment rates follow a linear pattern except for Italy, Spain and Estonia. The panel data analysis of the unemployment rates in the EU demonstrates a linear structure and unemployment hysteresis is proven to be valid across EU countries.

103

Unemployment Hysteresis , Natural Unemployment Rate , Linear and Non Linear Unit Root Tests

Celal Bayar University Journal Of Social Sciences

128