Effects of inflation and unemployment on economic growth in Turkey

The concepts of inflation, unemployment, and economic growth are the variables that form the basis for the evaluation of the general economic development of countries. Inflation and unemployment are crucial to determine the relationship between the variables guiding the economic policy to be applied. The aim of this study is to investigate the effects of inflation and unemployment on economic growth in different time horizons. For this purpose, econometric analysis was conducted with annual data on inflation, unemployment, and economic growth variables between 1980 and 2020. The series were decomposed into different time horizons with Wavelet Transform Analysis, then the stationarity of the series was investigated with the ADF (Augmented Dickey-Fuller) unit root test, and finally, Regression Analysis was applied to investigate the relationship between the variables. According to the results obtained as a result of the analysis; It is concluded that inflation and unemployment affect economic growth in the opposite direction in all time horizons. When all time horizons results are evaluated together, it is observed that the effect of unemployment on growth is generally higher than the effect of inflation although it is not regular, the effect of unemployment on growth increases as the horizons gets longer, while the impact of inflation on growth decreases. Likewise, as the horizon gets longer, it is concluded that the effect of unemployment and inflation on growth, that is the explanotory power of the model increases. Keywords: Inflation, Unemployment, Economic Growth, Wavelet Transform Analysis, Regression Analysis.