The Time-Varying Causality between Youth Unemployment and Foreign Trade in Turkey

Abstract

Unemployment is one of the clear indicators of the deterioration of internal economic balances. Although there is a close relationship between youth unemployment and adult unemployment, youth unemployment rates have always been higher than overall unemployment rates. Youth unemployment is one of the joint and most severe problems of countries. Although the increase in the workforce is positive for a functioning and growing economy, it is a problem in countries where unemployment has become a chronic problem. To prevent the youth from not contributing to production due to unemployment, the inclusion of a new workforce in the economy every year requires the creation of new jobs. Foreign trade is one of the policies that countries will implement to reduce unemployment rates. The primary purpose of this study is to investigate the impact of foreign trade on the labor market due to structural changes in production. For this purpose, Turkey's time-varying causality test has analyzed the relationship between quarterly data in 2013Q1-2020Q2 and youth unemployment, foreign trade, and actual economic growth variables. As a result, in 2015Q4, 2016Q1 and 2016Q2, there is a bidirectional causality relationship from youth unemployment to real economic growth, exports and imports. And there is a bidirectional causality relationship from real economic growth, exports, imports to youth unemployment.