Evaluation of intermediate goods imports on current account deficit and unemployment: The case of Turkey

The aim of the study is to investigate whether there is an economic causality relationship between the rates of intermediate goods import, current account deficit and unemployment in the selected period for Turkey with the Toda Yamamoto Causality Test. In the literature, most of the studies examining the relationship between current account deficit and unemployment rate focus on the relationship between economic growth and unemployment rate, and the relationship between unemployment rate and variables such as inflation and openness. However, as discussed in this study, a study examining the causal relationship between the rates of intermediate goods import, current account deficit and unemployment could not be found. In this context, this study aims to fill this gap in the literature. In the study, whether there is an economic causality between the rates of intermediate goods import, current account deficit and unemployment data of the Turkish Economy covering the period of 1988-2021 has been tested within the framework of the Toda-Yamato Causality test. For this aim, first the stationarity order of the variables has been determined by the ADF test, and the maximum order of integration has been obtained. Then the variables were included in the VAR lag length analysis so that the appropriate lag length could be determined. The results of the Toda-Yamato Causality test between the current account deficit rate and the unemployment rate indicate that there is no causality relationship between such variables, and the result of the Toda-Yamato Causality test between the unemployment rate and the intermediate goods import rate indicate that there is a oneway causality relationship between the variables at the 10% significance level. Accordingly, while unemployment rate is not the reason for intermediate goods import rate, intermediate goods import rate is the cause and unemployment rate is the result. Keywords: Intermediate Goods Import, Current Account Deficit, Unemployment Rate, Globalisation, Toda-Yamamoto Causality Test