the effect of foreign direct investment and trade openness on unemployment rate in asean countries

In this thesis, it analyzes the causal effect of the inflow of foreign direct investment and trade openness on the unemployment rate in ASEAN countries from the year 1991 to 2015. The thesis uses panel unit root, panel cointegration, and panel causality tests to estimate the results of the panel data. The thesis finds that there are a relationship and causal effect of trade openness and inflow of foreign direct investment on the unemployment rate. There is a long-term relationship between inflow of foreign direct investment and unemployment rate in Cambodia and Thailand, and there is a long-term relationship between trade openness and the unemployment rate in Myanmar, Brunei Darussalam, Lao PDR, Thailand, Singapore, and the Philippines. Nevertheless, the thesis finds that there is a causal effect of trade openness and inflow of foreign direct investment on the unemployment rate in the long-run but no causal effect in the short-run. This thesis suggests that higher value of trade openness and inflow of foreign direct investment may decrease the unemployment rate.