*Relationship between Economic Growth, Unemployment, Inflation and Current Account… DOI: http://dx.doi.org/10.5772/intechopen.93833*

Other models will be helping one by one for each dependent variable with lagged independent other variables. When null hypothesis rejected that means there is causality for each taken dependent variable to independent variables. In the Todo yamamato causality test held the extra the lag value is expanded and taken dmax =1 and used the k levels with suitable lags levels.

They [26] refer to this causality analysis performed between the same types of shocks, [27] named this causality test asymmetric causality test performed between different types of shocks. In the study, Unit Root perron test [28] was performed and the findings were presented in **Table 1** below.

It was examined by the method of [28]. The MZa and MZt tests are developed from the type of ADF and PP type test whereas the null hypothesis says the variable is not stationary. MSB and MPT tests are KPSS group tests and the null hypothesis refers the series is stationary.

**Table 1** was observed that all of the series were not stationary at level as I(0) but when the first differences were taken all variables became stationary as I (1).

After the determination of the degree of the level stationary of variables will be used for Granger causality test. In the analysis, causality relationships between the series were first examined by [29] method. The Akaike and Hannan-Quinn information criteria were determined based on VAR analysis. The first differences of the series were used for Granger causality and the results obtained are presented in **Table 2**.

**Table 1** results show there is a strong one-way causality relationship between Inflation and Economic growth. The relationship is from inflation to growth ıt means that the inflation is cause of growth as the rejected null hypothesis shows it.

Inflation rates are also directly affects the higher economic growth rate in Turkey. The import of the raw materials and semi-finished materials are needed during the production effects the economy.


*The parenthesis shows the %1 significance level of asymptotic critical levels.*

*\* The stationary serial that has at %1 significance critical values. The I(1) all models have trend and constant.*

#### **Table 1.**

*Ng and Perron (2001) unit root test results [28].*

To summarize it is observed that while growth accelerated when the current account balance in Turkey gave a deficit. The growth slowed when the current account balance gave a surplus. In this context, the ratio of the current account deficit to GDP was 4.7% in 2017, while the same rate rose to 1.1% in 2019. In the same period, the growth rate started to decrease and reached 0.9% from 7.4%.

*Linear and Non-Linear Financial Econometrics - Theory and Practice*

In this study we used Turkey's current account deficit (CAD), economic growth

In this study, the degree of stationarity of series are found with Dickey Fuller and Ng -Perron methods. Between series interaction are measured with classic [25] causality test, [26] were analyzed by symmetric latent causality test and [27] asymmetric latent causality test methods. While [27] are developing symmetric and asymmetric implicit causality tests, [25] suggested the analysis which negative and positive shocks can be separated for the cointegration analysis with using the cumulative totals of these shocks. Firstly these series are divided into positive and

If causality relationships between two series such as *y*1*<sup>t</sup>* and *y*2*<sup>t</sup>* series,

*<sup>y</sup>*1*t*¼*Y*1,0 <sup>þ</sup>X*<sup>t</sup>*

*<sup>y</sup>*2*t*¼*Y*2,0 <sup>þ</sup>X*<sup>t</sup>*

*ε*þ

*ε*2,*i*

*ε*2,*<sup>i</sup>*

*k*þ X *dmax*

*k*þ X *dmax*

*j*¼*k*þ1

*j*¼*k*þ1

\_ I¼0

\_ I¼0

The estimated equation will be held in the table with Toda- Yamamato causality;

*<sup>α</sup>*2*cadt*�*<sup>j</sup>* <sup>þ</sup><sup>X</sup>

*<sup>α</sup>*6*unet*�*<sup>j</sup>* <sup>þ</sup><sup>X</sup>

*k*

*i*¼1

*k*

*i*¼1

*ε*1*<sup>i</sup>* (7)

*ε*2*<sup>i</sup>* (8)

1,*<sup>i</sup>* ¼ max *ε*1,*<sup>i</sup>* ð Þ , 0 (9)

<sup>þ</sup> ¼ *max ε*2,*i*, ð Þ , 0 (10)

*<sup>ε</sup>i*1\_ <sup>¼</sup> min *<sup>ε</sup>*1,*<sup>i</sup>* ð Þ , 0 (11)

*α*3*Gt*�*<sup>i</sup>* þ

*<sup>α</sup>*<sup>7</sup> *<sup>ı</sup>nft*�*<sup>i</sup>* <sup>þ</sup>

� ¼ *min ε*2,*i*, ð Þ , 0 (12)

*k*þ X *dmax*

*j*¼*k*þ1

*j*¼*k*þ1

*k*þ X *dmax*

*α*4*Gt*�*<sup>j</sup>*

*<sup>α</sup>*2*ınft*�*<sup>j</sup>* <sup>þ</sup> *<sup>ε</sup>*1*<sup>t</sup>*

(13)

(G), inflation (INF) and unemployment rate (UR) data are used for the period 2000Q1-2020Q4. The data are taken from the Central Bank Electronic Data Distribution System (EVDS). Value of unemployment series from TUIK (Turkish Statis-

**5. Data and variables**

**6. Econometric methods**

tical Associatıon), others taken from EVDS.

negative shocks before these causality tests.

And the positive shocks are showed,

The negative shocks are determined:

*α*<sup>1</sup> *cadt*�*<sup>i</sup>* þ

*α*<sup>5</sup> *unet*�*<sup>i</sup>* þ

*cadt* <sup>¼</sup> *<sup>γ</sup>*<sup>0</sup> <sup>þ</sup><sup>X</sup>

**294**

*k*

*i*¼1

*i*¼1

þ þ<sup>X</sup> *k*

## *Linear and Non-Linear Financial Econometrics - Theory and Practice*


#### **Table 2.**

*Granger causality test.*

**Table 3** obtained the hidden causality test relationships results between the all variables which belong to [26]. We take the positive and negative shocks which refers different effect to causality between each other. The symmetric causality test shows the same shocks effect how affect the causality.

**Table 3** shows the positive shocks on inflatıon causes the positive shocks on unemployment. The two way causality with unemployment and inflation under the positive shocks effect.

There is a mutual causal relationship between growth and unemployment under the positive shock situation. The inflation causes the growth when they are affected negative shock. There is a one way causality growth to inflation. In the symmetric causality we could not find any causality with other variables.

> **Table 4** shows the causality relationships between positive and negative shocks of series which they were investigated by [27] method which based on [23] test. The test of models are suitable for the analysis. There is no normal distribution because of asymmetric structure also there are no correlation and heteroscedasticity are found with Lm test and White test results under the null hypothesis accepted and

**Hypothesis Var lag (p + d) Asymmetric causality test probe ARCH-LM White J.B.**

*CAD*<sup>þ</sup> ! *G*� 7 0.059 0.328 0.345 0.001

*INF*�!*UNE*<sup>þ</sup> 4 **0.003\*** 0.239 0.358 0.013

*UNE*�!*G*<sup>þ</sup> 6 0.458 0.234 0.127 0.022

*G*þ!*CAD*� 8 **0.002\*** 0.078 0.390 0.001

*UNE*�!*INF*,<sup>þ</sup> <sup>5</sup> **0.007\*** 0.084 0.56 0.002

*G*þ!*UNE*<sup>þ</sup> 5 0.156 0.671 0.551 0.012

*INF*þ!*G*� 6 0.001 0.458 0.755 0.003

*\*The asymmetric probability is statistically significant. The LM test for otocorrelation,White test for heteroscedasticity. The probability statistically significance levels for %5 confidence. Jarque bera test is for normality, the probability*

0.231

0.001

*<sup>G</sup>*þ!*INF*\_ <sup>4</sup> 0.867 0.645 0.788

*Relationship between Economic Growth, Unemployment, Inflation and Current Account…*

*INF*�!*G*<sup>þ</sup> 0.563

*DOI: http://dx.doi.org/10.5772/intechopen.93833*

*G*� ! *CAD*<sup>þ</sup> **0.001\***

*UNE*þ!*INF*\_ 0.548

*G*þ!*UNE*� **0.001\***

*CAD*�!*G*<sup>þ</sup> **0.476**

*INF*þ!*UNE*,� **0.013\***

*UNE*þ!*G*<sup>þ</sup> 0.088

*G*� ! *INF*<sup>þ</sup> **0.002\*** *The bold numbers are statistically significant probabilities.*

*levels are statistically significant that eject the null hypothesis.*

According to these results the one way causality from negative growth shock to

The positive shock of growth causes the negative current account deficit shock. That means when the growth is becoming more well the current account deficit is continuing to increase. The negative shock on ınflation causes the positive shock on unemployment. Negative shock on growth causes the positive shock inflation. The negative shock on unemployment and positive shock on inflation have bidirectional

In this study, economic growth for Turkey, the current account deficit, inflation and unemployment data in the period considered causality between these to show

positive current deficit shocks. The negative growth shocks cause the positive unemployment shock. This means the positive effect on growth makes the negative

effect on unemployment that makes the unemployment getting bigger.

not statistically significant probability levels [30–34].

causality.

**297**

**Table 4.**

*Asymmetric causality test.*

**7. Conclusion**


#### **Table 3.** *Symmetric causality test.*


*Relationship between Economic Growth, Unemployment, Inflation and Current Account… DOI: http://dx.doi.org/10.5772/intechopen.93833*

*The bold numbers are statistically significant probabilities.*

*\*The asymmetric probability is statistically significant. The LM test for otocorrelation,White test for heteroscedasticity. The probability statistically significance levels for %5 confidence. Jarque bera test is for normality, the probability levels are statistically significant that eject the null hypothesis.*

#### **Table 4.**

**Table 3** obtained the hidden causality test relationships results between the all variables which belong to [26]. We take the positive and negative shocks which refers different effect to causality between each other. The symmetric causality test

**Hypothesis Opt.lag. F statistics Prob** G ! INF 4 0,426 0.544 INF ! G 4 0,210 0.021\* CAD ! G 4 0,588 0.711 G ! CAD 4 0,834 0.455 INF ! UNE 4 0.615 0.233 UNE ! INF 4 0,588 0.355 UNE ! G 4 0,712 1.235 G ! UNE 4 0,833 0.783

*Linear and Non-Linear Financial Econometrics - Theory and Practice*

**Table 3** shows the positive shocks on inflatıon causes the positive shocks on unemployment. The two way causality with unemployment and inflation under the

**Hypothesis Test statistic Bootstrap**

*G*þ!*INF*<sup>þ</sup> 1231 4,87 *G*�!*INF*� 4553\* 2,31 *CAD*<sup>þ</sup> ! *G*<sup>þ</sup> 2237 4,55 *CAD*� ! *G*� 4674 5.22 *INF*þ!*UNE*<sup>þ</sup> 8.232\* 3,66 *INF*�!*UNE*� 3478 4,21 *UNE*þ!*G*<sup>þ</sup> 2361 5,67 *UNE*�!*G*� 2456 7,34 *G*þ!*CAD*<sup>þ</sup> 5346\* 2,40 *G*�!*CAD*� 5172 8,33 *UNE*�!*INF*,� <sup>4164</sup> 6,22 *UNE*þ!*INF*<sup>þ</sup> 4671\* 1,67 *G*þ!*UNE*<sup>þ</sup> 3477\* 2,39 *G*�!*INF*� 3782 6,33

**Critical value**

There is a mutual causal relationship between growth and unemployment under the positive shock situation. The inflation causes the growth when they are affected negative shock. There is a one way causality growth to inflation. In the symmetric

shows the same shocks effect how affect the causality.

*\*The null hypothesis the caused to determined variables.*

causality we could not find any causality with other variables.

positive shocks effect.

*\*The causality with the %5 significance level.*

**Table 3.**

**296**

*Symmetric causality test.*

**Table 2.**

*Granger causality test.*

*Asymmetric causality test.*

**Table 4** shows the causality relationships between positive and negative shocks of series which they were investigated by [27] method which based on [23] test. The test of models are suitable for the analysis. There is no normal distribution because of asymmetric structure also there are no correlation and heteroscedasticity are found with Lm test and White test results under the null hypothesis accepted and not statistically significant probability levels [30–34].

According to these results the one way causality from negative growth shock to positive current deficit shocks. The negative growth shocks cause the positive unemployment shock. This means the positive effect on growth makes the negative effect on unemployment that makes the unemployment getting bigger.

The positive shock of growth causes the negative current account deficit shock. That means when the growth is becoming more well the current account deficit is continuing to increase. The negative shock on ınflation causes the positive shock on unemployment. Negative shock on growth causes the positive shock inflation. The negative shock on unemployment and positive shock on inflation have bidirectional causality.
