The Research on Okun's Law's Validity in Turkey with Granger Causality Test (1988-2016)

Genc S., Aydin S.

MODERN JOURNAL OF LANGUAGE TEACHING METHODS, vol.8, no.4, pp.33-43, 2018 (ESCI) identifier

  • Publication Type: Article / Article
  • Volume: 8 Issue: 4
  • Publication Date: 2018
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Index Islamicus, MLA - Modern Language Association Database
  • Page Numbers: pp.33-43
  • Keywords: Okun's Law, unemployment, economic growth, Granger Causality test, VECM
  • Yıldız Technical University Affiliated: No


One of the most important macroeconomic problems which have gone on from the past to today is that the effort among the production factors is not utilized. In this sense, one of the studies for the solution of unemployment problem is whether the increase in economic growth will decrease the unemployment or not. The American economist Okun is the first economist who reviewed the relation between the economic growth and unemployment. Okun's theorem which explained the negative correlation between the economic growth and unemployment in America in 1948-1960 has included as Okun's Law in the economics literature. Okun's Law indicates that the unemployment rate decreases in the periods when the growth rate is high, and the unemployment rate increases in the periods when the growth rate is low. In this study, the validity of Okun's Law in Turkey has been reviewed. The concept and types of unemployment have been firstly included with this purpose. Secondly, the relationship between the unemployment and economic growth has been analyzed with Granger Causality test with the use of data between 1988-2016. Key words: countervailing power, mainstream economics, technostructure, Institutional economics.