A latent variable approach to forecasting the unemployment rate

Chew Lian Chua, G. C. Lim, Sarantis Tsiaplias

Research output: Journal PublicationArticlepeer-review

1 Citation (Scopus)


A forecasting model for unemployment is constructed that exploits the time series properties of unemployment while satisfying the economic relationships specified by Okun's law and the Phillips curve. In deriving the model, we jointly consider the problem of obtaining estimates of the unobserved potential rate of unemployment consistent with Okun's law and the Phillips curve, and associating the potential rate of unemployment with actual unemployment. The empirical example shows that the model clearly outperforms alternative forecasting procedures typically used to forecast unemployment.

Original languageEnglish
Pages (from-to)229-244
Number of pages16
JournalJournal of Forecasting
Issue number3
Publication statusPublished - Apr 2012
Externally publishedYes


  • forecasting
  • unemployment
  • unobserved components

ASJC Scopus subject areas

  • Modelling and Simulation
  • Computer Science Applications
  • Strategy and Management
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research


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