Drivers of youth unemployment in Malaysia: an ARDL analysis of inflation, economic growth, population, foreign direct investment (FDI) and education expenditure

Melly Mustagfiroh

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Type :	Final Year Project
Subject :	HG Finance
Main Author :	Melly Mustagfiroh
Title :	Drivers of youth unemployment in Malaysia: an ARDL analysis of inflation, economic growth, population, foreign direct investment (FDI) and education expenditure
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Place of Production :	Tanjong Malim
Publisher :	Fakulti Pengurusan dan Ekonomi
Year of Publication :	2025
Corporate Name :	Perpustakaan Tuanku Bainun
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Abstract : Perpustakaan Tuanku Bainun

Unemployment is a vital indicator of a country's economic health. A country's high unemployment rate, especially youth unemployment indicates that its economy is not competitive. This study examines the drivers of youth unemployment using the Autoregressive Distributed Lag (ARDL) model, focusing on macroeconomic factors namely, inflation rate, Gross Domestic Product (GDP), population, Foreign Direct Investment (FDI), and education expenditure. This study makes Malaysia the country studied with the use of annual time-series data spanning from 1970 to 2023, with the aim of exploring both long-run and short-run relationships between dependent variables and independent variables. The results of this study reveal that inflation has a significant inverse relationship with youth unemployment, while FDI shows an insignificant negative relationship with youth unemployment. Population and GDP shows a significant positive relationship with youth unemployment, while education expenditure exhibits a positive but insignificant effect on reducing youth unemployment, by highlighting the skills mismatch issue. This study also concludes that tailored economic policies addressing these drivers are critical to reducing the percentage of youth unemployment and fostering sustainable growth in Malaysia.

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