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Forecasting Unemployment across Countries: the Ins and Outs

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  • Barnichon, Regis
  • Garda, Paula

Abstract

This paper evaluates the flow approach to unemployment forecasting proposed by Barnichon and Nekarda (2012) for a set of OECD countries characterized by very different labor markets. We find that the flow approach yields substantial improvements in forecast accuracy over professional forecasts for all countries, with especially large improvements at longer horizons (one-year ahead forecasts) for European countries. Moreover, the flow approach has the highest predictive ability during recessions and turning points, when unemployment forecasts are most valuable.

Suggested Citation

  • Barnichon, Regis & Garda, Paula, 2015. "Forecasting Unemployment across Countries: the Ins and Outs," CEPR Discussion Papers 10910, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10910
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    1. Gary Solon & Ryan Michaels & Michael W. L. Elsby, 2009. "The Ins and Outs of Cyclical Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 84-110, January.
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    4. 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.
    5. Regis Barnichon & Christopher J. Nekarda, 2012. "The Ins and Outs of Forecasting Unemployment: Using Labor Force Flows to Forecast the Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 83-131.
    6. Jennifer C. Smith, 2011. "The Ins and Outs of UK Unemployment," Economic Journal, Royal Economic Society, vol. 121(552), pages 402-444, May.
    7. Régis Barnichon & Andrew Figura, 2013. "Declining Labor Force Attachment and Downward Trends in Unemployment and Participation," Finance and Economics Discussion Series 2013-88, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Yvonne Adema & Kees Folmer & Gerrit Hugo Heuvelen & Sonny Kuijpers & Rob Luginbuhl & Bas Scheer, 2020. "Unemployment Forecasts: Room for Improvement?," De Economist, Springer, vol. 168(3), pages 403-417, September.
    2. Fiaschi, Davide & Tealdi, Cristina, 2021. "A General Methodology to Measure Labour Market Dynamics," IZA Discussion Papers 14254, Institute of Labor Economics (IZA).
    3. Panchanan Das, 2023. "Creation and Destruction of Jobs in Urban Labour Market: Role of Gender, Caste and Religion in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 66(1), pages 225-237, March.
    4. Petropoulos, Fotios & Apiletti, Daniele & Assimakopoulos, Vassilios & Babai, Mohamed Zied & Barrow, Devon K. & Ben Taieb, Souhaib & Bergmeir, Christoph & Bessa, Ricardo J. & Bijak, Jakub & Boylan, Joh, 2022. "Forecasting: theory and practice," International Journal of Forecasting, Elsevier, vol. 38(3), pages 705-871.
      • Fotios Petropoulos & Daniele Apiletti & Vassilios Assimakopoulos & Mohamed Zied Babai & Devon K. Barrow & Souhaib Ben Taieb & Christoph Bergmeir & Ricardo J. Bessa & Jakub Bijak & John E. Boylan & Jet, 2020. "Forecasting: theory and practice," Papers 2012.03854, arXiv.org, revised Jan 2022.
    5. Das, Tirthatanmoy & Polachek, Solomon W., 2017. "Estimating labor force joiners and leavers using a heterogeneity augmented two-tier stochastic frontier," Journal of Econometrics, Elsevier, vol. 199(2), pages 156-172.
    6. Gehrke, Britta & Weber, Enzo, 2018. "Identifying asymmetric effects of labor market reforms," European Economic Review, Elsevier, vol. 110(C), pages 18-40.
    7. Lila, Maurício Franca & Meira, Erick & Cyrino Oliveira, Fernando Luiz, 2022. "Forecasting unemployment in Brazil: A robust reconciliation approach using hierarchical data," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    8. Athanasios O. Tagkalakis, 2016. "Unemployment dynamics and the Beveridge curve in Greece," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-34, December.
    9. Ilias Georgakopoulos, 2019. "Income and wealth inequality in Malta: evidence from micro data," CBM Working Papers WP/03/2019, Central Bank of Malta.
    10. Reuben Ellul, 2018. "Forecasting unemployment rates in Malta: A labour market flows approach," CBM Working Papers WP/03/2018, Central Bank of Malta.
    11. Consolo, Agostino & Foroni, Claudia & Martínez Hernández, Catalina, 2021. "A mixed frequency BVAR for the euro area labour market," Working Paper Series 2601, European Central Bank.

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    More about this item

    Keywords

    Steady-state unemployment; Stock-flow model;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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