DP10910 Forecasting Unemployment across Countries: the Ins and Outs
|Author(s):||Régis Barnichon, Paula Garda|
|Publication Date:||November 2015|
|Keyword(s):||steady-state unemployment, stock-flow model|
|JEL(s):||E24, E27, J6|
|Programme Areas:||Labour Economics, Monetary Economics and Fluctuations|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10910|
This paper evaluates the flow approach to unemployment forecasting proposed by Barnichon and Nekarda (2012) for a set of OECD countries characterized by very different labor markets. We find that the flow approach yields substantial improvements in forecast accuracy over professional forecasts for all countries, with especially large improvements at longer horizons (one-year ahead forecasts) for European countries. Moreover, the flow approach has the highest predictive ability during recessions and turning points, when unemployment forecasts are most valuable.