IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/5088.html
   My bibliography  Save this paper

Exact prediction of inflation and unemployment in Germany

Author

Listed:
  • Kitov, Ivan

Abstract

Potential links between inflation, π(t), and unemployment, UE(t), in Germany have been examined. There exists a consistent (conventional) Phillips curve despite some changes in monetary policy. This Phillips curve is characterized by a negative relation between inflation and unemployment with the latter leading the former by one year: UE(t-1) = -1.50π(t) + 0.116. Effectively, growing unemployment has resulted in decreasing inflation since 1971, i.e. for the period where GDP deflator observations are available. The relation between inflation and unemployment is statistically reliable with R2=0.86, where unemployment spans the range from 0.01 to 0.12 and inflation, as represented by GDP deflator, varies from -0.01 to 0.07. A linear and lagged relationship between inflation, unemployment and labor force has been also obtained for Germany. Changes in labor force level are leading unemployment and inflation by five and six year, respectively. Therefore this generalized relationship provides a natural prediction of inflation at a six-year horizon, as based upon current estimates of labor force level. The goodness-of-fit for the relationship is 0.87 for the period between 1971 and 2006, i.e. including the periods of high inflation and disinflation.

Suggested Citation

  • Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5088
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/5088/1/MPRA_paper_5088.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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. Kitov, Ivan, 2006. "The Japanese economy," MPRA Paper 2737, University Library of Munich, Germany.
    3. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages 45-61, May.
    4. Slacalek, Jirka & Fritsche, Ulrich & Dovern, Jonas & Döpke, Jörg, 2005. "European inflation expectations dynamics," Discussion Paper Series 1: Economic Studies 2005,37, Deutsche Bundesbank.
    5. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    6. Kitov, Ivan, 2007. "Inflation, unemployment, labor force change in European countries," MPRA Paper 14557, University Library of Munich, Germany.
    7. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Inflation as a function of labor force change rate: cointegration test for the USA," MPRA Paper 2734, University Library of Munich, Germany.
    8. Jan Gottschalk & Ulrich Fritsche, 2005. "The New Keynesian Model and the Long-Run Vertical Phillips Curve: Does It Hold for Germany?," Discussion Papers of DIW Berlin 521, DIW Berlin, German Institute for Economic Research.
    9. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Relationship between inflation, unemployment and labor force change rate in France: cointegration test," MPRA Paper 2736, University Library of Munich, Germany.
    10. Bernd Hayo & Boris Hofmann, 2006. "Comparing monetary policy reaction functions: ECB versus Bundesbank," Empirical Economics, Springer, vol. 31(3), pages 645-662, September.
    11. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Canada," MPRA Paper 5015, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On the potential non-equivalent exchange between developed countries
      by Ivan Kitov in Economics as Classical Mechanics on 2020-12-21 18:16:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ivan O. Kitov & Oleg I. Kitov, 2008. "Long-Term Linear Trends In Consumer Price Indices," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
    2. Ivan O. KITOV & Oleg I. KITOV, 2010. "Dynamics Of Unemployment And Inflation In Western Europe: Solution By The 1- D Boundary Elements Method," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(2(12)/Sum), pages 94-113.
    3. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Japan," MPRA Paper 5464, University Library of Munich, Germany.
    4. Ivan O. Kitov, 2010. "Inflation and unemployment in Japan: from 1980 to 2050," Papers 1002.0277, arXiv.org.
    5. Kitov, Ivan, 2009. "The anti-Phillips curve," MPRA Paper 13641, University Library of Munich, Germany.
    6. Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.

    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. Kitov, Ivan, 2009. "The anti-Phillips curve," MPRA Paper 13641, University Library of Munich, Germany.
    2. Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.
    3. Ivan O. KITOV & Oleg I. KITOV, 2010. "Dynamics Of Unemployment And Inflation In Western Europe: Solution By The 1- D Boundary Elements Method," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(2(12)/Sum), pages 94-113.
    4. Ivan O. KITOV & Oleg I. KITOV & Svetlana A. DOLINSKAYA, 2008. "Comprehensive Macro Ï¿½ Model For The Us Economy," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(4(6)_Wint).
    5. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Japan," MPRA Paper 5464, University Library of Munich, Germany.
    6. Ivan Kitov & Oleg Kitov & Svetlana Dolinskaya, 2007. "Linear Lagged Relationship Between Inflation, Unemployment and Labor Force Change Rate in France: Cointegration Test," Mechonomics mechonomics2, Socionet.
    7. Ivan O. Kitov & Oleg I. Kitov, 2008. "Long-Term Linear Trends In Consumer Price Indices," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
    8. Ivan Kitov, 2007. "Inflation, Unemployment, Labor Force Change in European Counties," Mechonomics mechonomics7, Socionet.
    9. Kitov, Ivan & Kitov, Oleg, 2009. "PPI of durable and nondurable goods: 1985-2016," MPRA Paper 15874, University Library of Munich, Germany.
    10. Kitov, Ivan, 2009. "Predicting gold ores price," MPRA Paper 15873, University Library of Munich, Germany.
    11. Kitov, Ivan, 2009. "Predicting the price index for jewelry and jewelry products: 2009 to 2016," MPRA Paper 15875, University Library of Munich, Germany.
    12. Oleg KITOV & Ivan KITOV, 2012. "Inflation And Unemployment In Switzerland: From 1970 To 2050," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(2(20)/ Su), pages 141-156.
    13. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Relationship between inflation, unemployment and labor force change rate in France: cointegration test," MPRA Paper 2736, University Library of Munich, Germany.
    14. Ivan O. Kitov, 2010. "Inflation and unemployment in Japan: from 1980 to 2050," Papers 1002.0277, arXiv.org.
    15. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    16. Ahrens, Steffen & Snower, Dennis J., 2014. "Envy, guilt, and the Phillips curve," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 69-84.
    17. Ivan O. KITOV & Oleg I. KITOV & Svetlana A. DOLINSKAYA, 2009. "Modelling Real Gdp Per Capita In The Usa:Cointegration Tests," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(1(7)_ Spr).
    18. Mourougane, Annabelle, 2017. "Crisis, potential output and hysteresis," International Economics, Elsevier, vol. 149(C), pages 1-14.
    19. Kitov, Ivan, 2006. "The Japanese economy," MPRA Paper 2737, University Library of Munich, Germany.
    20. Liam Graham & Dennis J. Snower, 2008. "Hyperbolic Discounting and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 427-448, March.

    More about this item

    Keywords

    inflation; unemployment; labor force; prediction; Germany;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:5088. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.