An Empirical Small Labor Market Model for the Czech Economy
Year: 2011 Volume: 61 Issue: 5 Pages: 434-449
Abstract: An empirical small labor market model for the Czech Republic is estimated in the state-space framework. Its purpose is joint modeling of the labor force, employment, wages, hours worked, output, and the GDP deflator in a consistent “structural” framework suitable for short-run forecasting. The model entails, in the long run, five driving forces: a trend labor force component, a trend labor productivity component, a long-run inflation rate, an unemployment trend, and a trend hours worked component. In the short run, the dynamics are governed by a VAR model. The model aims at describing co-movements in the labor-market variables, provides a model-based decomposition into the trend and cyclical components of the underlying series, and outperforms unrestricted VARs in forecasting. The paper also describes the second moments of labor market data at various frequencies and discusses to what extent these properties can be replicated by the data.
JEL classification: C51, C53, E17, J21
Keywords: structural time series, labor market, forecasting
RePEc: http://ideas.repec.org/a/fau/fauart/v61y2011i5p434-449.html
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