On the Usefulness of Constant Gain Least Squares when Forecasting the Unemployment Rate

Jan-Erik Antipin (), Farid Jimmy Boumediene () and Pär Österholm
Additional contact information
Jan-Erik Antipin: Finnish Tax Administration
Farid Jimmy Boumediene: Confederation of Swedish Enterprise

No 129, Working Papers from National Institute of Economic Research

Abstract: In this paper, we assess the usefulness of constant gain least squares (CGLS) when forecasting the unemployment rate. Using quarterly data from 1970 to 2009, we conduct an out-of-sample forecast exercise in which univariate autoregressive models for the unemployment rate in Australia, Sweden, the United Kingdom and the United States are em-ployed. Results show that CGLS very rarely outperforms OLS. At horizons of six to eight quarters, OLS is always associated with higher forecast precision, regardless of model size or gain employed for Australia, Sweden and the United States. Our findings suggest that while CGLS has been shown valuable when forecasting certain mac-roeconomic time series, it has shortcomings when forecasting the unemployment rate. One problematic feature is found to be an increased tendency for the autoregressive model to have explosive dynamics when estimated with CGLS.

Keywords: Out-of-sample; forecasts (search for similar items in EconPapers)
JEL-codes: E24 E27 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-09-10
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.konj.se/download/18.42684e214e71a39d072 ... nemployment-Rate.pdf (application/pdf)

Related works:
Journal Article: On the Usefulness of Constant Gain Least Squares when Forecasting the Unemployment Rate (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:nierwp:0129

Access Statistics for this paper

More papers in Working Papers from National Institute of Economic Research National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Sarah Hegardt Grant ( this e-mail address is bad, please contact ).