Exact prediction of inflation and unemployment in Japan
AbstractPast and future evolution of inflation, p(t), and unemployment, UE(t), in Japan is modeled. Both variables are represented as linear functions of the change rate of labor force level. These models provide an accurate description for disinflation in the 1990s and deflationary period in the 2000s. In Japan, there exists a statistically reliable (R2=0.68) Phillips curve. This Phillips curve is characterized by a negative relation between inflation and unemployment and their synchronous evolution: UE(t) = -0.94p(t) + 0.045. Effectively, growing unemployment has resulted in decreasing inflation since 1982. A linear and lagged generalized relationship between inflation, unemployment and labor force has been also obtained for Japan: p(t) = 2.8*dLF(t)/LF(t) + 0.9*UE(t) - 0.0392. Labor force projections allow a reliable prediction of inflation and unemployment in Japan: CPI inflation will be negative (between -0.5% and -1% per year) during the next 40 years. Unemployment will increase from 4.0% in 2010 to 5.3% in 2050
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 5464.
Date of creation: Oct 2007
Date of revision:
inflation; unemployment; labor force; modeling; Japan;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-03 (All new papers)
- NEP-CBA-2007-11-03 (Central Banking)
- NEP-MAC-2007-11-03 (Macroeconomics)
- NEP-MON-2007-11-03 (Monetary Economics)
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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