Forecasting Unemployment Rates with International Factors

21 Pages Posted: 17 Jan 2020

See all articles by Pablo M. Pincheira

Pablo M. Pincheira

Adolfo Ibanez University - School of Business

Ana María Hernández

affiliation not provided to SSRN

Date Written: December 28, 2019

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

JEL Classification: J60, J64, J01, F22, F44, F47, F43, F41, E24, E27, E32, E37

Suggested Citation

Pincheira, Pablo M. and Hernández, Ana María, Forecasting Unemployment Rates with International Factors (December 28, 2019). Available at SSRN: https://ssrn.com/abstract=3510597 or http://dx.doi.org/10.2139/ssrn.3510597

Pablo M. Pincheira (Contact Author)

Adolfo Ibanez University - School of Business ( email )

Diagonal Las Torres 2640
Peñalolén
Santiago
Chile

Ana María Hernández

affiliation not provided to SSRN

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