A Sectorial Analysis for Turkey and Netherlands in A VAR Framework: Empirical Evidence from Cointegration and Causality Analysis

Olorogun L., Demir C.

AGBA Conference Documents, vol.17, no.1, pp.1-14, 2021 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 17 Issue: 1
  • Publication Date: 2021
  • Journal Name: AGBA Conference Documents
  • Page Numbers: pp.1-14
  • Istanbul Gelisim University Affiliated: Yes

Abstract

This study explores short-run covariance between agriculture employment and sustainable economic development in two European countries (Netherlands and Turkey) using annual time series data of 1990–2019 period. Error Correction Model (ECM) and novel VAR-based Granger causality model were used to affirm causality among the series. Our study found a short-run covariance between agriculture employment and sustainable economic growth for the Netherlands and Turkey. The findings further revealed bi-directional and uni-directional causality between agriculture employment, industrial sector, gross domestic product, and manufacturing value added in the case of the Netherlands. However, in the case of Turkey, the gross domestic product, manufacturing, and services value were added, and export had unidirectional causality. Turkey failed to maximize its comparative advantage in its agricultural sector, in contrast to the Netherlands. These results have policy implications for the Turkish economy. Agricultural sector can be expanded to create significant employment opportunities and spur sustainable economic growth. The Turkish government should develop a more modern and robust system of agriculture to optimize the comparative advantage associated with its factor endowments.