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An Unobserved Components Forecasting Model of Non-Farm Employment for the Nashville MSA

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  • Zietz, Joachim A.
  • Penn, David A.

Abstract

The study demonstrates how unobserved component modeling, also known as structural time series modeling, can be usefully applied to forecast non-farm employment for the Nash-ville MSA. Short-term out-of-sample forecasts are provided for total employment and its three components: services, construction, and manufacturing. The forecasts are compared to those of a simple vector autoregression. It is shown that the suggested methodology provides very ac-curate short-term forecasts even in the absence of a full set of independent regressors. In addition, it makes it possible to back out long-term trends, which aid the forecaster in making long-term projections of sectoral employment.

Suggested Citation

  • Zietz, Joachim A. & Penn, David A., 2008. "An Unobserved Components Forecasting Model of Non-Farm Employment for the Nashville MSA," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1).
  • Handle: RePEc:ags:jrapmc:132344
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    References listed on IDEAS

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    5. Harvey, Andrew, 1997. "Trends, Cycles and Autoregressions," Economic Journal, Royal Economic Society, vol. 107(440), pages 192-201, January.
    6. Joachim Zietz, 1996. "The relative price of tradables and nontradables and the U.S. trade balance," Open Economies Review, Springer, vol. 7(2), pages 147-160, April.
    7. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    8. Gerald A. Carlino, 2003. "A confluence of events? explaining fluctuations in local employment," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 6-12.
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