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Improving Unemployment Rate Forecasts Using Survey Data

  • Pär Österholm

    ()

    (National Institute of Economic Research)

This paper investigates whether forecasts of the Swedish unemployment rate can be improved by using business or household survey data. We conduct a simulated out-of-sample forecast exercise in which the performance of a Bayesian VAR model with only macroeconomic variables is compared to that when the model also includes variables based on survey data. Results show that the forecasting performance at short horizons can be improved. The improvement is largest when forward-looking variables based on data from the manufacturing industry are employed.

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Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 23 (2010)
Issue (Month): 1 (Spring)
Pages: 16-26

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Handle: RePEc:fep:journl:v:23:y:2010:i:1:p:16-26
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  1. Adolfson, Malin & Andersson, Michael K. & Lindé, Jesper & Villani, Mattias & Vredin, Anders, 2005. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," Working Paper Series 188, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jun 2006.
  2. Amos Golan & Jeffrey M. Perloff, 2004. "Superior Forecasts of the U.S. Unemployment Rate Using a Nonparametric Method," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 433-438, February.
  3. Todd Clark & Michael McCracken, 2005. "Evaluating Direct Multistep Forecasts," Econometric Reviews, Taylor & Francis Journals, vol. 24(4), pages 369-404.
  4. Berger, Helge & Österholm, Pär, 2009. "Does money still matter for U.S. output?," Economics Letters, Elsevier, vol. 102(3), pages 143-146, March.
  5. Norman R. Swanson, 2000. "An Out of Sample Test for Granger Causality," Econometric Society World Congress 2000 Contributed Papers 0362, Econometric Society.
  6. Galina Hale & Òscar Jordà, 2007. "Do monetary aggregates help forecast inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr13.
  7. Magnus Gustavsson & Pär Österholm, 2010. "The presence of unemployment hysteresis in the OECD: what can we learn from out-of-sample forecasts?," Empirical Economics, Springer, vol. 38(3), pages 779-792, June.
  8. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-67, July.
  9. Pär Österholm, 2008. "Can forecasting performance be improved by considering the steady state? An application to Swedish inflation and interest rate," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(1), pages 41-51.
  10. John A. Cotsomitis & Andy C. C. Kwan, 2004. "Can Consumer Confidence Forecast Household Spending? Evidence from the European Commission Business and Consumer Surveys," Departmental Working Papers _161, Chinese University of Hong Kong, Department of Economics.
  11. Andy C.C. Kwan & John A. Cotsomitis, 2006. "The Usefulness of Consumer Confidence in Forecasting Household Spending in Canada: A National and Regional Analysis," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 185-197, January.
  12. Armstrong, J. Scott, 2007. "Significance tests harm progress in forecasting," International Journal of Forecasting, Elsevier, vol. 23(2), pages 321-327.
  13. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
  14. Philip Rothman, 1998. "Forecasting Asymmetric Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 164-168, February.
  15. Milas, Costas & Rothman, Philip, 2008. "Out-of-sample forecasting of unemployment rates with pooled STVECM forecasts," International Journal of Forecasting, Elsevier, vol. 24(1), pages 101-121.
  16. Antonio Ribba, 2006. "The joint dynamics of inflation, unemployment and interest rate in the United States since 1980," Empirical Economics, Springer, vol. 31(2), pages 497-511, June.
  17. Jared Laxton & Igor Ermolaev & Charles Freedman & Ondra Kamenik & Michel Juillard & Douglas Laxton & Ioan Carabenciov & Dmitry Korshunov, 2008. "A Small Quarterly Multi-Country Projection Model," IMF Working Papers 08/279, International Monetary Fund.
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