Causality Between Public Expenditure and Unemployment in Turkey

Abstract

Providing full employment in the economy enable achieving macro-economic targets more easily. For this reason, achieving the full employment target is of great importance for all countries. One of the top priorities of governments in ensuring economic stability is to prevent unemployment. Various policies are implemented for this purpose. However, policies that are not based on empirical studies are considered with suspicion. In this study, the relationship between unemployment and public spending in Turkey were determined by Granger causality test. The parameters of the model were estimated by establishing a multiple linear regression model. In the model, the unemployment rate is taken as dependent variable and Public Expenditure components as independent variables. The data belonging to the quarters between 2000 and 2018 was analyzed with EViews 9.0 software. Findings obtained as a result of the analysis showed that public spending is an important factor in reducing the unemployment rate and there is a strong correlation between the investment expenditures and the unemployment rate. As a result, it has emerged that policies that will create new production capacities and increase the growth rate should be implemented.