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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

Suggested Citation

  • Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Japan," MPRA Paper 5464, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:5464
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    File URL: https://mpra.ub.uni-muenchen.de/5464/1/MPRA_paper_5464.pdf
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    References listed on IDEAS

    as
    1. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality.
    2. Kitov, Ivan, 2006. "Real GDP per capita in developed countries," MPRA Paper 2738, University Library of Munich, Germany.
    3. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    4. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Inflation as a function of labor force change rate: cointegration test for the USA," MPRA Paper 2734, University Library of Munich, Germany.
    5. 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.
    6. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
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    Cited by:

    1. Kitov, Ivan, 2009. "The anti-Phillips curve," MPRA Paper 13641, University Library of Munich, Germany.
    2. Ivan O. Kitov & Oleg I. Kitov, 2008. "Long-Term Linear Trends In Consumer Price Indices," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
    3. Ivan O. KITOV & Oleg I. KITOV, 2010. "Dynamics Of Unemployment And Inflation In Western Europe: Solution By The 1- D Boundary Elements Method," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(2(12)/Sum), pages 94-113.
    4. Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.

    More about this item

    Keywords

    inflation; unemployment; labor force; modeling; Japan;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • O11 - Economic Development, Innovation, 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

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