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The Abrams curve shows the relationship between public expenditures and unemployment in a country. In the economy where this curve is valid, the increase in public expenditures causes the unemployment rate to increase. This study tests the validity of the Abrams curve for Turkey over the period 1980-2018. The stationarity of the variables is examined by the Fourier KPSS unit root test and it is understood that they are stationary at the first differences. Later, the long-term relationship between the variables is examined by the Fourier Shin cointegration test and it is determined that the variables are cointegrated. The CCR method is used to estimate long-run coefficients. According to this, one unit increase in public expenditures causes unemployment rate increase by 0.45 units. The findings from the FMOLS and DOLS estimators also support this result. Finally, the Toda-Yamamoto causality test is implemented and it is observed that there is a unidirectional causal relationship running from public expenditures to unemployment rate. The results demonstrate that the Abrams curve is valid for Turkey. [ABSTRACT FROM AUTHOR]

In this study, the relationship between regional unemployment rate and public expenditures in Turkey has been investigated by panel autoregressive distributed lag (ARDL) method. The panel data consists of 26 Development Regions of Turkey for the period 2004-2018. In order to analyse the long-run relationship between variables, stationary is tested by panel unit tests, then cointegration is estimated. According to the results of Panel ARDL-PMGE, 1% increase in public expenditures reduced the regional unemployment by 0,043% in the long run. On the contrary, 1% increase in public expenditures increased the regional unemployment by 0,043% in the short run. The result of this study show that Abrams curve hypothesis is valid in the short run, while the Keynesian approach is valid in the long run. [ABSTRACT FROM AUTHOR]