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Exact prediction of inflation and unemployment in Japan

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  • Kitov, Ivan

Abstract

Past 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5464.

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Date of creation: Oct 2007
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Handle: RePEc:pra:mprapa:5464

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Keywords: inflation; unemployment; labor force; modeling; Japan;

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References

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  1. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Relationship between inflation, unemployment and labor force change rate in France: cointegration test," MPRA Paper 2736, University Library of Munich, Germany.
  2. Ivan Kitov & Oleg Kitov & Svetlana Dolinskaya, 2007. "Inflation as a Function of Labor Force Change Rate: Cointegration Test for the USA," Mechonomics, Socionet mechonomics3, Socionet.
  3. Ivan Kitov, 2007. "Real GDP Per Capita in Developed Countries," Mechonomics, Socionet mechonomics5, Socionet.
  4. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
  5. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality.
  6. Ivan Kitov, 2007. "Exact Prediction of Inflation in the USA," Mechonomics, Socionet mechonomics4, Socionet.
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Cited by:
  1. Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.
  2. Kitov, Ivan, 2009. "The anti-Phillips curve," MPRA Paper 13641, University Library of Munich, Germany.

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