IDEAS home Printed from https://ideas.repec.org/a/ers/journl/vxxiiiy2020ispecial2p400-409.html
   My bibliography  Save this article

Forecasting the Level of Unemployment, Inflation and Wages: The Case of Sweden

Author

Listed:
  • Tomasz Grodzicki
  • Mateusz Jankiewicz

Abstract

Purpose: In the macroeconomic theory and analyses there are a number of studies focused on three crucial phenomena, namely unemployment, inflation, and wages. As a result, the term called ‘Phillips curve’ was introduced in order to illustrate a negative correlation between inflation and the unemployment rate. This paper is to establish the relationship between unemployment, inflation, and wages in Sweden, and to forecast their value using. Design/Methodology/Approach: The Vector Autoregression (VAR) model has been used for the analysis. The analysis applies the values of the unemployment rate, the level of the minimum wage and the value of inflation in the period of 2002 - 2017 on a quarterly basis. Findings: Results from the analysis show that (1) the unemployment rate and the level of wages do not explain well enough inflation developments in Sweden and (2) as in many previous empirical studies on this topic, there are no significant changes in employment resulting from the increase in the minimum wage. Practical Implications: This study is of great importance especially for the policy makers who can apply the presented analysis tools to predict further tendencies in shaping value of the main economic indicators and make appropriate decisions to avoid possible recession and its negative consequences. Therefore, the outcomes of this paper can increase efficiency of the economic policy in numerous countries. Originality/Value: This research checks the suitability of the widely known tool to evaluate dependencies and predict further situation of the main economic indicators in Sweden. Moreover, the analysis shows that the real relationships between unemployment rate, minimum wages and inflation are not always the same as these, which appear in the literature.

Suggested Citation

  • Tomasz Grodzicki & Mateusz Jankiewicz, 2020. "Forecasting the Level of Unemployment, Inflation and Wages: The Case of Sweden," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 400-409.
    • Handle: RePEc:ers:journl:v:xxiii:y:2020:i:special2:p:400-409
    as

    Download full text from publisher

    File URL: https://www.ersj.eu/journal/1832/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    2. T. H. Gindling, 2018. "Does increasing the minimum wage reduce poverty in developing countries?," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-10, November.
    3. Bradley, Michael E., 2007. "Efficiency Wages and Classical Wage Theory," Journal of the History of Economic Thought, Cambridge University Press, vol. 29(2), pages 167-188, June.
    4. Miroslaw Bochenek, 2016. "Paul Anthony Samuelson and his work (on the hundredth anniversary of his birth)," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 15(3), pages 265-278, September.
    5. James H. Stock & Mark W. Watson, 2001. "Vector Autoregressions," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 101-115, Fall.
    6. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014, November.
    7. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 57-86, October.
    8. Richard V. Burkhauser & Joseph J. Sabia, 2007. "The Effectiveness Of Minimum‐Wage Increases In Reducing Poverty: Past, Present, And Future," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 262-281, April.
    9. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jeffrey Clemens & Michael R. Strain, 2023. "How important are minimum wage increases in increasing the wages of minimum wage workers?," Contemporary Economic Policy, Western Economic Association International, vol. 41(4), pages 594-612, October.
    2. Pierre Cahuc & Cette Gilbert & André Zylberberg, 2008. "Salaire minimum et bas revenus," Post-Print halshs-00638149, HAL.
    3. Antonio Ribba, 2020. "Is the unemployment–inflation trade‐off still alive in the Euro Area and its member countries? It seems so," The World Economy, Wiley Blackwell, vol. 43(9), pages 2393-2410, September.
    4. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.
    5. Richard V. Burkhauser & Kosali I. Simon, 2008. "Who Gets What From Employer Pay or Play Mandates?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 75-102, March.
    6. Fitriya & Abdul Basyith & Rabin Ibnu Zainal, 2020. "The Doubled-Edge Sword of Raising the Minimum Wage: The Case of Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(12), pages 1453-1465.
    7. Ahmed, Rizwan & Chen, Xihui Haviour & Kumpamool, Chamaiporn & Nguyen, Dung T.K., 2023. "Inflation, oil prices, and economic activity in recent crisis: Evidence from the UK," Energy Economics, Elsevier, vol. 126(C).
    8. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    9. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.
    10. Dao, Ngoc, 2024. "Federal minimum wage expansion to homecare workers: Employment and income effects," Labour Economics, Elsevier, vol. 87(C).
    11. Klausinger, Hansjörg, 1999. "The stability of full employment. A reconstruction of chapter 19-Keynesianism," Department of Economics Working Paper Series 63, WU Vienna University of Economics and Business.
    12. Renata Grzeda Latocha & Gernot Nerb, 2004. "Modelling Short-term Interest Rates in the Euro Area Using Business Survey Data," Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2004(1), pages 43-69.
    13. Fitriya & Abdul Basyith & Rabin Ibnu Zainal, 2020. "The Doubled-Edge Sword of Raising the Minimum Wage: The Case of Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(12), pages 1453-1465, December.
    14. Enn Lun Yong, 2019. "Unemployment and the European Union, 2000–2017: structural exploration of distant past economic experience and future prosperity," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-21, December.
    15. Bhattarai, Keshab, 2016. "Unemployment–inflation trade-offs in OECD countries," Economic Modelling, Elsevier, vol. 58(C), pages 93-103.
    16. Raymundo M. Campos-Vazquez & Gerardo Esquivel, 2023. "The Effect of the Minimum Wage on Poverty: Evidence from a Quasi-Experiment in Mexico," Journal of Development Studies, Taylor & Francis Journals, vol. 59(3), pages 360-380, March.
    17. Antonio Ribba, 2019. "Is the unemployment inflation trade-off still alive in the Euro Area and its member countries? It seems so," Department of Economics 0160, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    18. David F. Hendry, 2020. "A Short History of Macro-econometric Modelling," Economics Papers 2020-W01, Economics Group, Nuffield College, University of Oxford.
    19. Carlos Medel, 2017. "Forecasting Chilean inflation with the hybrid new keynesian Phillips curve: globalisation, combination, and accuracy," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 20(3), pages 004-050, December.
    20. Jose Asturias & Emin Dinlersoz & John Haltiwanger & Rebecca Hutchinson & Alyson Plumb, 2021. "Business Applications as a Leading Economic Indicator?," Working Papers 21-09, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    VAR modelling; unemployment rate; inflation; minimum wage rate.;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:journl:v:xxiii:y:2020:i:special2:p:400-409. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ersj.eu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.