Unemployment and Inflation in Western Europe: Solution by the Boundary Integral Method
28 Pages Posted: 30 Mar 2009
Date Written: March 29, 2009
Abstract
Using an analog of the boundary element method in engineering and science, we analyze and model unemployment rate in Austria, Italy, the Netherlands, Sweden, Switzerland, and the United States as a function of inflation and the change in labor force. Originally, the model linking unemployment to inflation and labor force was developed and successfully tested for Austria, Canada, France, Germany, Japan, and the United States. Autoregressive properties of neither of these variables are used to predict their evolution. In this sense, the model is a self-consistent and completely deterministic one without any stochastic component (external shocks) except that associated with measurement errors and changes in measurement units. Nevertheless, the model explains between ~65% and ~95% of the variability in unemployment and inflation. For Italy, the rate of unemployment is predicted at a time horizon of nine (!) years with pseudo out-of-sample root-mean-square forecasting error of 0.55% for the period between 1973 and 2006. One can expect that the unemployment will be growing since 2008 and will reach ~11.4% [ plus/minus 0.6 %] near 2012. After 2012, unemployment in Italy will start to descend.
Keywords: unemployment, inflation, labor force, boundary integral method, prediction, Western Europe
JEL Classification: J64, J21, J11, E24, E31
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Inflation, Unemployment, Labor Force Change in European Countries
By Ivan Kitov
-
Inflation, Unemployment, Labor Force Change in the USA
By Ivan Kitov
-
Exact Prediction of Inflation in the USA
By Ivan Kitov
-
Exact Prediction of Inflation and Unemployment in Canada
By Ivan Kitov
-
Exact Prediction of Inflation and Unemployment in Germany
By Ivan Kitov
-
Exact Prediction of Inflation and Unemployment in Japan
By Ivan Kitov
-
Long-Term Linear Trends in Consumer Price Indices
By Ivan Kitov and Oleg Kitov
-
Inflation as a Function of Labor Force Change Rate: Cointegration Test for the USA
By Ivan Kitov, Oleg Kitov, ...
-
By Ivan Kitov
-
GDP Growth Rate and Population
By Ivan Kitov