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Forecasting unemployment in Finland: A flow approach

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  • Lindblad, Annika
  • Gäddnäs, Niklas

Abstract

In this paper we evaluate whether the accuracy of Finnish unemployment rate forecasts can be improved by utilising the information in the flows into and out of unemployment. We compare and contrast different methodologies for constructing the flows. Our results indicate that Bayesian vector autoregressive models improve forecasts over a simple autoregressive model. Labour market flows improve forecasts over very short forecasting horizons. Additional labour market variables can improve forecast accuracy. The time-series models struggle to improve upon professional forecasts, but a combination of these forecasts proves advantageous especially when forecasting two quarters ahead.

Suggested Citation

  • Lindblad, Annika & Gäddnäs, Niklas, 2024. "Forecasting unemployment in Finland: A flow approach," BoF Economics Review 7/2024, Bank of Finland.
    • Handle: RePEc:zbw:bofecr:300079
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    References listed on IDEAS

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    1. Michele Lenza & Giorgio E. Primiceri, 2022. "How to estimate a vector autoregression after March 2020," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(4), pages 688-699, June.
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    5. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    6. Nuno Goncalves & Domingos Seward, 2019. "Forecasting unemployment in Portugal: A labour market flows approach," CFP Working Papers 01/2019, Portuguese Public Finance Council.
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    More about this item

    Keywords

    unemployment; labour market flows; forecasting;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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