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Original Article

Ekonomik Yaklasim. 2012; 23(83): 69-91

NAIRU Estimation for the Turkish Economy

Özlem YİĞİT; Atilla GÖKÇE.

The purpose of this paper is to estimate NAIRU for the Turkish economy using the structural VAR method. NAIRU is defined as the part of the measured unemployment rate unrelated with inflation in the long run. The estimates are obtained by applying the bivariate VAR model to quarterly data on unemployment rate and the consumer price index for the period from 1989:01 to 2011:01. In this study, NAIRU shocks and inflation shocks are defined as two types of structural shocks and the shocks are separated from each other by their effects on inflation. According to the findings of the study, NAIRU is observed to be gradually rising in parallel to the economic and social transformation in Turkey between 1989 and 2011. In addition, NAIRU is observed as more volatile during economic crisis experienced in the period 1989-2001 compared to that of the period 2002-2008 in which the more stable growth rates were observed. NAIRU is estimated at an average of 8.4% between the years 1989 and 2001 and at an average of 9.6% from 2002 until the second quarter of 2008. NAIRU is estimated at the average 12.50% after the third quarter of 2008. An estimated rate for the first quarter of 2011 is 10.75%.

Key words: NAIRU, Unemployment, Unemployment Gap, Hysteresis, SVAR. JEL Classification: C32, C51, E24.

Article Language: Turkish English

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