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Forecasting Australian Unemployment Rates using Spectral Analysis

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Author Info

  • Patrick J. Wilson

    ()
    (University of Technology, Sydney)

  • L.J. Perry

Abstract

Univariate spectral analysis is used to model seasonally unadjusted quarterly unemployment rate data for Australia, 1978(2) to 2002(3). Data are tested for three categories: persons, males and females. Dynamic out-of-sample forecasts are made for 8 quarters using spectral analysis models evaluated against ARIMA model counterparts. It is found that the spectral analysis models achieve higher levels of forecasting accuracy than ARIMA counterparts, including turning point forecast accuracy. These results emerge in spite of weaker in-sample explanatory power of the spectral models against the ARIMA models. It is concluded the results suggest that the spectral model is ultimately better attuned to the various cyclical forces of the past unfolding into the future.

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Bibliographic Info

Article provided by Bankwest Curtin Economics Centre (BCEC), Curtin Business School in its journal Australian Journal of Labour Economics.

Volume (Year): 7 (2004)
Issue (Month): 4 (December)
Pages: 459-480

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Handle: RePEc:ozl:journl:v:7:y:2004:i:4:p:459-480

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Web page: http://business.curtin.edu.au/research/publications/journals/ajle/
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Keywords: Unemployment; Models; Duration; Incidence; and Job Search Econometric and Statistical Methods; Econometric Methods: Single Equation Models; Single Variables: Time-Series Models;

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References

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  1. R. F. Engle, 1972. "Band Spectrum Regressions," Working papers 96, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Jeff Borland, 1997. "Unemployment in Australia-Prospects and Policies: An Overview," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(4), pages 391-404.
  3. Olivier Jean Blanchard, 1991. "Wage Bargaining and Unemployment Persistence," NBER Working Papers 3664, National Bureau of Economic Research, Inc.
  4. Max Stevenson & Maurice Peat, 2000. "Forecasting Australian Unemployment Rates," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 4(1), pages 41-55, March.
  5. Gary Burtless, 2002. "Can Supply-Side Policies Reduce Unemployment? Lessons from North America," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(1), pages 3-28.
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  8. Randal Verbrugge Randal Verbrugge, 1997. "Investigating Cyclical Asymmetries," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 2(1), pages 1-10, April.
  9. Tom Valentine, 1993. "The Sources of Unemployment: A Simple Econometric Analysis," Working Paper Series 32, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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  11. Perry, L.J. & Wilson, P.J., 2001. "The Accord and Strikes: An International Perspective," Economics Working Papers wp01-03, School of Economics, University of Wollongong, NSW, Australia.
  12. Bodman, Philip M, 1998. "Asymmetry and Duration Dependence in Australian GDP and Unemployment," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 399-411, December.
  13. Im, Eric Iksoon & Cauley, Jon & Sandler, Todd, 1987. "Cycles and Substitutions in Terrorist Activities: A Spectral Approach," Kyklos, Wiley Blackwell, vol. 40(2), pages 238-55.
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  15. Harvey, Andrew C, 1978. "Linear Regression in the Frequency Domain," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 507-12, June.
  16. Daniel Levy, 2002. "Cointegration in Frequency Domain," Working Papers 2002-12, Department of Economics, Bar-Ilan University.
  17. Skalin, Joakim & Teräsvirta, Timo, 1998. "Modelling asymmetries and moving equilibria in unemployment rates," Working Paper Series in Economics and Finance 262, Stockholm School of Economics, revised 05 Oct 1998.
  18. van Dijk, Dick & Franses, Philip Hans & Paap, Richard, 2002. "A nonlinear long memory model, with an application to US unemployment," Journal of Econometrics, Elsevier, vol. 110(2), pages 135-165, October.
  19. Tom Valentine, 1993. "The Sources Of Unemployment: A Simple Econometric Analysis," Economic Papers, The Economic Society of Australia, vol. 12(4), pages 1-20, December.
  20. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
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Cited by:
  1. L.J. Perry & Patrick J. Wilson, 2005. "The Decline of Seasonality in Australian Quarterly Aggregate Strike Statistics: 1983-2003," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(1), pages 43-71, March.

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