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Forecasting unemployment in Portugal: A labour market flows approach

Author

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  • Nuno Goncalves
  • Domingos Seward

Abstract

This paper applies a labour market flows approach to forecasting the unemployment rate, initially developed by Barnichon and Nekarda (2012) and subsequently extended by Barnichon and Garda (2016), to the Portuguese labour market. We start by implementing a simple two-state labour market forecasting model and then extend it to a three-state labour market forecasting model which incorporates movements in and out of the labour force. We test the forecasting accuracy of each of these models and find that the two-state flow-based forecasting model performs slightly better than the other tested models. We conclude that worker flow data is a valuable input for forecasting the unemployment in Portugal.

Suggested Citation

  • Nuno Goncalves & Domingos Seward, 2019. "Forecasting unemployment in Portugal: A labour market flows approach," CFP Working Papers 01/2019, Portuguese Public Finance Council.
    • Handle: RePEc:alf:wpaper:2019-01
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    File URL: https://www.cfp.pt/en/publications/other-publications/forecasting-unemployment-in-portugal-a-labour-market-flows-approach
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    More about this item

    Keywords

    forecast; labour market dynamics; unemployment rate; worker flows;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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