Evaluation of Intermediate Goods Imports through Current Account Deficit and Unemployment: Turkish Case

The relationship between foreign trade and unemployment, particularly through the current account deficit (CAD), remains a debated issue in the economic literature. While imports of final goods are generally associated with adverse employment effects, imports of intermediate goods (IGI), which are essential inputs in domestic production processes, may have different implications for labor markets. In this regard, this study aims to examine the causal relationships between intermediate goods imports, the current account deficit, and unemployment in Türkiye over the period of 1988–2021. The analysis employs the Toda-Yamamoto causality test, which enables causality testing irrespective of the integration properties of the variables. The empirical findings indicate no causal relationship between the current account deficit and unemployment. However, a unidirectional causality running from intermediate goods imports to unemployment is identified. These findings suggest that the structure of imports plays a significant role in shaping labor market outcomes in Türkiye.The study contributes to the literature by focusing on the role of intermediate goods imports and by examining the joint relationship between intermediate goods imports, the current account deficit, and unemployment. The findings also provide important policy implications regarding the sustainability of import-dependent production structures in developing economies like Türkiye. . As the originality of the study, such a study examining the causality relationship between the IGI and the CAD and the unemployment rates could not be found in the literature.