The real exchange rate and the employment market: Evidence for Turkey by panel cointegration analysis

Abstract

The purpose of this paper is to investigate the relationship between real exchange rate and the employment market by using the panel cointegration analysis with the data of Turkey which is adopting flexible exchange rate regime for the period the study was done. According to the FMOLS and DOLS panel results, there is a cointegration between RER (real exchange rate) and aggregate employment. The FMOLS individual results indicate that except for mining and finance, there is a cointegration between RER and employment. DOLS individual cointegration test results rejects null hypothesis of no cointegration for all the employment variables except for mining and electricity.