Unemployment And Growth: Okun Coefficients For Turkish Economy

Abstract

According to common interpretation of Okun Law, the main reason for increase in unemployment rate is deficiency in aggregate demand and low capacity utilization rates. In other words, this Law states a negative relation between unemployment rates and economic growth. However, the observed high unemployment rates with high growth rates in Turkey after 2001 economic crisis seems to contradict with this Law In this context, the Okun coefficient is estimated in this study for both manufacturing industry and aggregate economy The estimation results provide relatively low coefficients. In other words, the output variations are not very sensitive to unemployment changes in Turkish economy. Both the capacity utilization rate and working hours effect output level positively.