How much Unemployment is Structural in Turkey? An Unobserved Components Approach

English (OpenAlex)

This study aims to determine the course of structural unemployment by decomposing trend and cyclical components of 1987-2019 actual unemployment in Turkey. This decomposition will be carried out in the context of time-varying NAIRU (Non-Accelerating Inflation Rate of Unemployment). It is accepted that structural unemployment is the unemployment that is consistent with the performance of the economy at the potential output level and, therefore, can be proxied by the time-varying NAIRU. The developments in Turkish labor markets during the investigation period emphasize that the importance of structural factors besides the cyclical ones. Therefore, it is crucial to examine how much of the increase in the unemployment rate is structural in the Turkish economy. Structural unemployment rate figures obtained through the state-space model estimated by using reduced form accelerationist Phillips curve indicate the presence of high and increasing structural unemployment problems in Turkey, specifically during the last years. Alternative models like Beveridge curve and Hodrick – Prescott filtering also produce results confirming this determination and reveal that the unemployment gap is almost closing in the country.