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Inflation, unemployment, labor force change in European countries

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Author Info
Kitov, Ivan

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Abstract

Linear relationships between inflation, unemployment, and labor force are obtained for two European countries - Austria and France. The best fit models of inflation as a linear and lagged function of labor force change rate and unemployment explain more than 90% of observed variation (R2>0.9). Labor force projections for Austria provide a forecast of decreasing inflation for the next ten years. In France, inflation lags by four years behind labor force change and unemployment allowing for an exact prediction at a four-year horizon. Standard error of such a prediction is lower than 1%. The results confirm those obtained for the USA and Japan and provide strong evidences in favor of the concept of labor force growth as the only driving force behind unemployment and inflation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14557.

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Date of creation: 01 Jan 2007
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Handle: RePEc:pra:mprapa:14557

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Related research
Keywords: inflation; unemployment; labor force; modeling;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  2. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
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  5. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-2), pages 297-346. [Downloadable!]
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  15. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany. [Downloadable!]
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  21. Sbordone, Argia M., 2002. "Prices and unit labor costs: a new test of price stickiness," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 265-292, March. [Downloadable!] (restricted)
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  22. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  26. Kitov, Ivan, 2006. "Real GDP per capita in developed countries," MPRA Paper 2738, University Library of Munich, Germany. [Downloadable!]
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  28. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246 National Bureau of Economic Research, Inc. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kitov, Ivan, 2006. "The Japanese economy," MPRA Paper 2737, University Library of Munich, Germany. [Downloadable!]
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