An Examination of the Turkish Economy After the 2008 Economic Crisis within the Context of Kaldor's Law: Residual Augmented Least Squares (RALS) Cointegration Approach
Chapter from the book: Eroğlu Sevinç, D. & Yüce Akıncı, G. (eds.) 2023. Studies on Economic and Financial Policies.

Ali Çelik
İstanbul Gelişim University

Synopsis

This study aimed to investigate the nexus between economic growth and industrial production index within the framework of Kaldor's law. For this purpose, the analysis was carried out for Turkey by using the quarterly data between 2010Q1-2022Q3. Current techniques were used in the analysis process. In this context, RALS-ADL and RALS-EG2 methods from cointegration tests were used, while Fourier ADF, Residuals Extended RALS-ADF, and RALS-LM unit root tests were used as unit root tests, which are among the current techniques. According to the results of the research, the existence of a cointegration relationship between the variables has been proven. While FMOLS results revealed that a 1% increase in industrial production increased GDP by 3.23%, DOLS results showed that a 1% increase in industrial production boosted GDP by 3.18%. VECM-based linear Granger causality test results and Dicks and Panchenko's (2006) non-linear causality analysis results are compatible with each other. From both causality tests, it was found that there is a one-way causality relationship from industrial production to GDP. As a result, it has been determined that Kaldor's law is valid in the Turkish economy for the examined period.

How to cite this book

Çelik, A. (2023). An Examination of the Turkish Economy After the 2008 Economic Crisis within the Context of Kaldor's Law: Residual Augmented Least Squares (RALS) Cointegration Approach. In: Eroğlu Sevinç, D. & Yüce Akıncı, G. (eds.), Studies on Economic and Financial Policies. Özgür Publications. DOI: https://doi.org/10.58830/ozgur.pub68.c169

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Published

March 24, 2023

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