Forecasting Employment in Europe: Are Survey Results Helpful?
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In this paper we evaluate the forecasting performance of employment expectations for employment growth in 15 European states. Our data cover the period from the first quarter 1998 to the fourth quarter 2014. With in-sample analyses and pseudo out-of-sample exercises, we find that for most of the European states considered, the survey-based indicator model outperforms common benchmark models. It is therefore a powerful tool for generating more accurate employment forecasts. We observe the best results for one quarter ahead predictions that are primarily the aim of the survey question. However, employment expectations also work well for longer forecast horizons in some countries.
KeywordsEmployment forecasting European business survey Employment expectations Granger causality
JEL ClassificationE27 J00 J49
Our special thanks goes to two anonymous referees, Alfred Garloff and Marcel Thum for their careful reading of our manuscript. We are grateful to Wolfgang Nagl, Michael Weber and seminar participants at the Technische Universität Dresden for helpful comments and suggestions; and to Lisa Giani Contini for editing this text. We also thank the participants at the meeting of the Regional Research Network from the Institute for Employment Research in November 2013. Comments from the 1st CGDE Doctoral Workshop are also gratefully acknowledged.
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