Forecasting Unemployment Rates with International Factors

Pablo Pincheira and Ana María Hernández

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we study international linkages when forecasting unemployment rates in a sample of 24 OECD economies. We propose a Global Unemployment Factor (GUF) and test its predictive ability considering in-sample and out-of-sample exercises. Our main results indicate that the predictive ability of the GUF is heterogeneous across countries. In-sample results are statistically significant for Austria, Belgium, Czech Republic, Finland, France, Ireland, The Netherlands, Portugal, Slovenia, Sweden and United States. Robust statistically significant out-of-sample results are found for Belgium, Czech Republic, France, The Netherlands, Slovenia, Sweden and the United States. This means that the inclusion of the GUF adds valuable information to predict domestic unemployment rates, at least for these last seven countries.

Keywords: Forecasting; unemployment; international factors; time-series models; out-of-sample comparison; nested models. (search for similar items in EconPapers)
JEL-codes: C1 C12 C2 C22 C4 C49 C5 C52 C53 C6 E2 E24 E27 E3 E37 E6 E63 F0 F00 F3 F36 F37 F6 F62 F66 J0 J00 J01 J08 J6 J60 J64 (search for similar items in EconPapers)
Date: 2019-12-28
New Economics Papers: this item is included in nep-eec, nep-for, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:97855

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