This blog helps us to voice new ideas before they are formalized in an article or working paper. In many cases, original ideas are partially wrong and mathematics has to be changed severely. This was the case with labour force participation rate and productivity. As a rule, our initial ideas are good enough and do not suffer big changes.
In January 2011, we posted on inflation and unemployment in Australia. Meanwhile we prepared a formal working paper and submitted it to www.arXiv.org and MPRA. The major difference with the blog posts is a complete description of all models and thorough statistical assessment which includes successful tests for cointegration. However, it needs slight polish before we send it to a journal.
Now the paper on Australia is available:
Abstract
A quantitative model is presented linking the rate of inflation and unemployment to the change in the level of labor force. The link between the involved variables is a linear one with all coefficients of individual and generalized models obtained empirically. To achieve the best fit between measured and predicted time series cumulative curves are used as a simplified version of the 1-D boundary elements method. All models for Australia are similar to those obtained for the US, France, Japan and other developed countries and thus validate the concept and related quantitative model.
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