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2020•EUROPEAN RESEARCH STUDIES JOURNALOpen access

An Empirical Analysis of the Relationship between Foreign Direct Investment and Unemployment Rate: Evidence from Turkey

Mehman Karimov, Anett Parádi-Dolgos, Rita Rita

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Abstract

Purpose: This paper is aimed to analyze the impact of Foreign Direct Investment inflows in Turkey on macroeconomic variables among them the unemployment rate. Design/methodology/approach: The time series datasets (FDI, UEMP), were obtained from the World Bank database, which covers the time period 1980-2017 were utilized in employed statistical models as the ADF Unit Root, Philips–Perron Unit Root, Johansen co-integration, and the Granger causality tests, to accomplish the empirical part of the paper. Findings: Based on the results, it was confirmed that there was at most one presence of the co-integration among the analyzed series. Additionally, the results of Granger causality test had showed that there is unidirectional causality from FDI to UEMP. Originality: Thus, this paper can be a proof that Foreign Direct Investment inflows have a crucial impact on decreasing the unemployment rate in Turkey.

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What this paper is about

Purpose: This paper is aimed to analyze the impact of Foreign Direct Investment inflows in Turkey on macroeconomic variables among them the unemployment rate. Design/methodology/approach: The time series datasets (FDI, UEMP), were obtained from the World Bank database, which covers the time period 1980-2017 were utilized in employed statistical models as the ADF Unit Root, Philips–Perron Unit Root, Johansen co-integration, and the Granger causality tests, to accomplish the empirical part of the paper. Findings: Based on the results, it was confirmed that there was at most one presence of the co-integration among the analyzed series. Additionally, the results of Granger causality test had showed that there is unidirectional causality from FDI to UEMP. Originality: Thus, this paper can be a proof that Foreign Direct Investment inflows have a crucial impact on decreasing the unemployment rate in Turkey.

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Available abstract

Purpose: This paper is aimed to analyze the impact of Foreign Direct Investment inflows in Turkey on macroeconomic variables among them the unemployment rate. Design/methodology/approach: The time series datasets (FDI, UEMP), were obtained from the World Bank database, which covers the time period 1980-2017 were utilized in employed statistical models as the ADF Unit Root, Philips–Perron Unit Root, Johansen co-integration, and the Granger causality tests, to accomplish the empirical part of the paper. Findings: Based on the results, it was confirmed that there was at most one presence of the co-integration among the analyzed series. Additionally, the results of Granger causality test had showed that there is unidirectional causality from FDI to UEMP. Originality: Thus, this paper can be a proof that Foreign Direct Investment inflows have a crucial impact on decreasing the unemployment rate in Turkey.

Key concepts: Granger causality, Foreign direct investment, Unit root, Economics, Unit root test, Augmented Dickey–Fuller test, Econometrics, Unemployment

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