Economic Growth and Youth Unemployment in Malaysia

Abstract

High unemployment is a significant issue for the economy, particularly among young people. By establishing a balance between the sustainability of economic growth and the creation of new jobs, government initiatives are meant to address this problem. The country's employment creation regulations are the main factor that has the greatest impact on young people. This study examines the impact of youth unemployment on Malaysia's economic growth between 1991 and 2019. Along with the inflation rate and wage data, this study also looked at foreign direct investment (FDI) for the chosen time frame. The study's particular goals were to analyse the relationship between Malaysia's economic growth and youth unemployment as well as the effects of youth unemployment on that country's economic development. The hypotheses examined include Okun's law and the Philip Curve theory, which explain various elements of unemployment and economic expansion. The ARDL bound test, Granger causality test, and the ECM approach were the methodologies used. Thus, there is a current unidirectional causal relationship between youth unemployment and this phenomenon. The data demonstrated that there is a positive association between youth unemployment and economic growth, but that this relationship is not statistically significant in Malaysia. The result indicates that youth unemployment has a growing impact on economic growth.