Abstract:

The main objective of this paper is to discuss how inflation and economic growth affects youth unemployment in emerging economies. Within this study, the effect of inflation and economic growth on youth unemployment was tested for 20 emerging economies (Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia Federation, South Africa, Thailand, Turkey) with the data covering the period of 1991–2016. The relationship between the variables was tested via second generation panel cointegration and panel causality tests. According to the findings of Durbin-Hausman panel cointegration test by Westerlund (2008), there is a cointegration relationship between variables. In addition, Dumitrescu-Hurlin (2012) panel causality test results have indicated that there exists statistically significant bidirectional causality between inflation and youth unemployment and also between economic growth and youth unemployment. Based on these results, it is possible to say that inflation and economic growth substantially affect youth unemployment and the direction of the effect is negative on youth unemployment. That means positive developments in inflation and economic growth lead to a decline in youth unemployment rates for selected emerging economies.

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