Questioning the validity of the phillips curve for Turkey: 1991-2023 period

The relationship between inflation and unemployment has been the subject of numerous studies in the economic literature. Since these two concepts are the leading macroeconomic problems among countries, they also directly affect social life. In this respect, these concepts are also referred to as the "two fundamental greats" in American political economy. In this respect, the Phillips curve concept, which expresses the inverse relationship between inflation and unemployment, emerges as an important tool to ensure price stability. This study investigates whether the Phillips Curve is valid for the Turkish economy in the period 1991-2023. Taking into account the annual fluctuations in both inflation and unemployment data, the study analyzes how these two indicators affect each other over time. In this context, firstly, the historical development of the Phillips curve is explained and then the validity of the Phillips curve in Turkey is questioned. Labor markets, money markets and the relationships between them are evaluated in detail. In addition, country studies on the validity of the Phillips curve in Turkey and other countries are presented. Finally, the validity of the Phillips curve is questioned through econometric analysis for Turkey. The analysis reveals the existence of a long-run relationship between the variables. A 1% increase in the inflation rate leads to a 0.14% decrease in unemployment rates. Likewise, a 1% increase in unemployment rates leads to a decrease in inflation rates by approximately 1.02%. However, when the model is evaluated as a whole, the estimated ratios are low, although attention is drawn to the Phillips curve. This draws attention to the fact that there are many different factors/problems affecting inflation and unemployment. These include (i) structural problems (institutional weaknesses, high and persistent inflation, poor quality education, high external debt, etc.), (ii) economic shocks (energy prices, exchange rate increases, etc.), and (iii) expectations (inflation expectations, interest rate expectations, etc.).