Can unemployment be cured by economic growth and foreign direct investment in TURKEY?

This study applies the VAR technique of variance decomposition and impulse response function analysis to investigate various interrelationships among foreign direct investment (FDI), exports (EX), unemployment (UR) and gross domestic product (GDP) for the period 2000:1 to 2007:4 in Turkey. We find two cointegrating vectors in the system, indicating there is long run relationship. Our findings show that FDI did not have any contribution to reduce the unemployment rate in Turkey. Variations in EX have a positive impact on GDP but they are insignificant. Therefore, this study does not support the export led economic growth model. Variation in GDP does not reduce the unemployment rate either. © EuroJournals Publishing, Inc. 2009