Methods and solutions to combat inflation and unemployment: The case of Turkey

Inflation and unemployment are the most important indicators that are measured to evaluate the success of an economy in a given period. Therefore, in every period of economic history, the economists were closely interested in money, inflation and unemployment. In this study, inflation and unemployment variables were explained and an assessment was made within the framework of the policies applied in the struggle against these problems in Turkey. Findings suggest that it is essential to reduce inflation and unemployment rates for a sustainable economic growth. In addition, it is investigated the relationship between inflation (CPI), unemployment rates, real effective exchange rate and m2 money supply variables in Turkey using the monthly data for the period 2005:1- 2014:5. In this study, it is utilized unit root test and Johansen cointegration analysis. The results of the unit root tests show that the time series are stationary. In cointegration analysis, there is at most 1 cointegration. There is a negative relationship between inflation and unemployment but, there is no statistically significant relationship between inflation and exchange rate. In addition, a significant positive relationship was found between inflation and m2 money supply. Keywords: Inflation, Unemployment, Economy Politics, Turkish Economy.