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Inflation and unemployment in Japan: from 1980 to 2050

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  • Ivan O. Kitov

Abstract

The evolution of inflation, p(t), and unemployment, UE(t), in Japan has been modeled. Both variables were represented as linear functions of the change rate of labor force, dLF/LF. These models provide an accurate description of disinflation in the 1990s and a deflationary period in the 2000s. In Japan, there exists a statistically reliable (R2=0.68) Phillips curve, which is characterized by a negative relation between inflation and unemployment and their synchronous evolution: UE(t) = -0.94p(t) + 0.045. Effectively, growing unemployment has resulted in decreasing inflation since 1982. A linear and lagged generalized relationship between inflation, unemployment and labor force has been also obtained for Japan: p(t) = 2.8*dLF(t)/LF(t) + 0.9*UE(t) - 0.0392. Labor force projections allow a prediction of inflation and unemployment in Japan: CPI inflation will be negative (between -0.5% and -1% per year) during the next 40 years. Unemployment will increase from ~4.0% in 2010 to 5.3% in 2050.

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  • Ivan O. Kitov, 2010. "Inflation and unemployment in Japan: from 1980 to 2050," Papers 1002.0277, arXiv.org.
    • Handle: RePEc:arx:papers:1002.0277
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    References listed on IDEAS

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    1. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality.
    2. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2006. "Modelling Structural Breaks In The Us, Uk And Japanese Unemployment Rates," Economics and Finance Discussion Papers 06-10, Economics and Finance Section, School of Social Sciences, Brunel University.
    3. Kamada, Koichiro, 2005. "Real-time estimation of the output gap in Japan and its usefulness for inflation forecasting and policymaking," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 309-332, December.
    4. Kitov, Ivan, 2006. "Real GDP per capita in developed countries," MPRA Paper 2738, University Library of Munich, Germany.
    5. Kitov, Ivan, 2006. "The Japanese economy," MPRA Paper 2737, University Library of Munich, Germany.
    6. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    7. Emmanuel De Veirman, 2009. "What Makes the Output-Inflation Trade-Off Change? The Absence of Accelerating Deflation in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1117-1140, September.
    8. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
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    Cited by:

    1. Kitov, Ivan & Kitov, Oleg, 2012. "Sustainable trends and periodicity in consumer price indices indicate that the era of low energy prices is approaching," MPRA Paper 43392, University Library of Munich, Germany.

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