Does Foreign Direct Investment Contribute to Decrease Unemployment in Türkiye? Nonlinear ARDL and Asymmetric Causality Approaches

This study explores the symmetric and asymmetric effects of inward FDI on unemployment by using data from Türkiye from 1988 to 2020. ARDL (Autoregressive Distributed Lag), NARDL (Nonlinear Autoregressive Distributed Lag) and asymmetric causality test are applied to identify impacts of FDI on unemployment. While ARDL findings show no cointegration relationship, the NARDL findings prove the cointegration relationship between the variables. According to NARDL findings, in the long run, while a rise in FDI decreases unemployment, a reduction in FDI increases unemployment. Also, NARDL findings concur with the asymmetric causality test results. Positive shocks in FDI are seen as the cause of negative shocks in unemployment. Moreover, negative shocks in FDI are seen as the cause of positive shocks in unemployment. As a result, the analysis clearly demonstrates that FDI has a crucial impact on unemployment in Türkiye. Considering that Türkiye ranks 29th in the list of countries attracting foreign direct investment, it is understood that rule-based and incentive policies are necessary in order to attract more amount of FDI.