EXPLORING THE NONLINEAR EFFECT OF FINANCIAL DEVELOPMENT ON THE GLOBAL UNEMPLOYMENT RATE: EVIDENCE FROM BAYESIAN INFERENCE
DOI:
https://doi.org/10.18623/rvd.v22.n6.4003Abstract
This study aims to analyze the nonlinear effect of financial development on the unemployment rate of 117 countries in the world during the period from 2004 to 2022. The study uses the Bayesian inference method to test the nonlinear effect of financial development on the unemployment rate. The estimation results show that financial development has a positive effect on the unemployment rate. In addition, the financial development threshold is 0.73. When FD is below this threshold, it reduces the unemployment rate with a probability of 99.96%. In contrast, when financial development passes the threshold, it causes a negative effect on unemployment. These findings open policy directions in the context before and after the threshold, and this strengthens and opens the path to reduce the unemployment rate.
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