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Analysis of Changes in Japan's Unemployment Rate Using Gross Flow Data

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  • Kuroda, Sachiko

    (Institute for Monetary & Econ Studies, Bank of Japan)

Abstract

Using the flow data between the three states of employment, unemployment and not-in-the-labor-force, I undertook a detailed examination of factors contributing to changes in Japans unemployment rate. The results of the analysis provide the following explanations for Japans rising unemployment rate since 1991. First, the transition probability from employment to unemployment has risen, and at the same time the transition rate from unemployment to employment has declined significantly. Second, the transition probability from unemployment to not-in-the-labor-force has declined for both men and women, resulting in the accumulation of unemployment. Third, the results point to the possibility that the unemployment rate was also pushed up by the flow of workers from not-in-the-labor force to unemployment. Parallel to a decline in the transition probability from not-in-the-labor-force to employment, an increased inflow of men from not-in-the-labor-force to unemployment began in the mid-1990s. The same trend is observable for women beginning between the end of the 1990s and 2000. Next, I estimated the Phillips curve using the flow data as a source of additional information for forecasting price trends. The results indicate that the forecasting performance of the Phillips curve can in fact be improved by using flow data between employment and unemployment that are sensitive to trends in price levels and business conditions.

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Bibliographic Info

Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 21 (2003)
Issue (Month): 1 (February)
Pages: 69-104

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Handle: RePEc:ime:imemes:v:21:y:2003:i:1:p:69-104

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Cited by:
  1. Lin, Ching-Yang & Miyamoto, Hiroaki, 2012. "Gross worker flows and unemployment dynamics in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 44-61.
  2. Hiroaki Miyamoto, 2009. "Cyclical Behavior of Unemployment and Job Vacancies in Japan," Working Papers EMS_2009_17, Research Institute, International University of Japan.
  3. Brian Silverstone & Will Bell, 2011. "Gross Labour Market Flows in New Zealand: Some Questions and Answers," Working Papers in Economics 11/15, University of Waikato, Department of Economics.
  4. Kuroda, Sachiko & Yamamoto, Isamu, 2003. "The Impact of Downward Nominal Wage Rigidity on the Unemployment Rate: Quantitative Evidence from Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(4), pages 57-85, December.

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