PHILLIPS CURVE ANALYSIS IN THE CASE OF TURKEY

Abstract

The aim of this study is to analyze the validity of Phillips curve in Turkey. As known from the theory, in theoric literature, in terms of Phillips curve based on the relation between inflation and unemployment rate, it is possible to see different approaches. The aim of this study is to handle the relation between inflation and unemployment rate using econometrics and evaluate in terms of Turkey. In the empirical literature, usually short and long relations are estimated to analyze Phillips curve. The empirical part of this study supports the empirical literature. In this study, for unemployment and inflation rate, monthly data for 2003-2016 is used. The data is obtained from World Bank, OECD and TUIK official website. First, the unit root tests with structural breaks are carried out to the series, from the obtained results, both of the series have unit root with structural break, beside this, both for short and long term, there is no cointegration relationship between these variables. So, Phillips curve is not valid for Turkey, not only for short term, but also for long.