Deriving a euro area monthly indicator of employment: a real time - PowerPoint PPT Presentation

Deriving a euro area monthly indicator of employment: a real time comparison of alternative model-based approaches 6th Colloquium on Modern Tools for Business Cycle Analysis: "The Lessons from Global Economic Crisis" Filippo Moauro Eurostat, unit D-5 29 September 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 1 / 22

Introduction and motivation Applied work : deriving a monthly euro area indicator of employment Assessing real time more accessible technologies of temporal disaggregation Temporal disaggregation methods are largely used for estimating Quarterly National Accounts (QNA) Chow-Lin family type methods have recently had several re…nements Seemingly Unrelated Time Series Equations (SUTSE) model have been also extended to handle a problem of temporal disaggregation Also dynamic factor models have been used The problem of log-transformation has also …nd an e¤ective solution Last developments go towards large-scale models, which require the use of the EM algorithm F.Moauro (Eurostat, unit D-5) 29/09/2010 2 / 22

The methods used in the experiment: regression methods ∆ l y t = ρ ∆ l y t � 1 + m + gt + β 0 0 ∆ l x t + β 0 1 ∆ l x t � 1 + ε t , � 0 , σ 2 � , ∆ y t = y t - y t � 1 , ε t � NID y t scalar, l order of di¤erentiation (0 or 1 ) � 1 < ρ < 1, m constant, g for trend, β 0 and β 1 for x t modeled at lag 0 and 1; ε t is the residual white noise with variance σ 2 Chow and Lin (CL) model: l = 0, and β 1 = � ρβ 0 Fernandez (FE): l = 1, ρ = 0, β 1 = 0, or l = 0, ρ = 1 and β 1 = � β 0 Litterman (LT): l = 1 and β 1 = � ρβ 0 ADL(1,0) model: β 1 = 0 with l = 0 in levels ( l = 1, in di¤erences) convenient statistical treatment, likelihood depends on ρ only non linear state space approach for data in logs Proietti (2006) F.Moauro (Eurostat, unit D-5) 29/09/2010 3 / 22

SUTSE models y t = ( y 1 t , . . . , y Nt ) 0 , LLT model : y t sum of level µ t plus irregular component ξ t � � y t = µ t + ξ t , ξ t � NID 0 , Σ ξ , � � 0 , Σ η µ t = µ t � 1 + β t � 1 + η t , η t � NID , � � β t = β t � 1 + ζ t , ζ t � NID 0 , Σ ζ . y t fully observed : standard KF statistical treatment modi…ed KF approach when y 1 t , . . . , y Nt available at di¤erent frequencies+temporal disaggregation, Harvey and Chung (2000) for data in levels and Proietti and Moauro (2996) for data in logs. Complexity in estimation concerns hiper-parameters in Σ ξ , Σ η , and Σ ζ N large: EM algorithm by Koopman (1993) Here the EM algorithm is implemented to non-linear temporal disaggregation F.Moauro (Eurostat, unit D-5) 29/09/2010 4 / 22

Strategy and results of model estimation monthly indicator of the euro area employment for the total economy, .... 6 sections of the NACE Rev.1.1 classi…cation of economic activities. Direct strategy: total quarterly employment against unemployment Indirect strategy: ∑ of subtotal estimates In the SUTSE framework, assessed also contribution of larger MS data. Finally, simultaneous SUTSE model of 49 series to both euro area and MS data of unemployment and employment sectoral components. Use of sectoral data: strategy which embodies and translates standard practice of NSIs of compiling o¢cial statistics from a detailed set of coherent and integrated measures of economic activities. The application is novel and challenging: Data are available mainly quarterly, time series cover a short sample period related monthly indicators are quite a few F.Moauro (Eurostat, unit D-5) 29/09/2010 5 / 22

The dataset 56 seasonally adjusted series for the euro area of 12 MS (Germany, France, Italy, Spain, The Netherlands, Belgium, Luxembourg, Portugal, Austria, Greece, Finland and Ireland), plus Belgium, Germany, Spain, France, Italy and the Netherlands. QNA employment series from …rst quarter 1995 to third quarter 2009 1 (source Eurostat) 7 employment series for total economy 6 sectoral components: (AGR) Agriculture, hunting, forestry and …shing, (IND) Industry; (COS) Construction; (TTC) Trade, hotels and restaurants, transport and communication; (FBS).Financial services and business activities; (OTS) Other services; monthly series of total unemployment in thousands of persons for all 2 the same geographical entities in the sample January 1995-December 2010 released by Eurostat in February 2010; F.Moauro (Eurostat, unit D-5) 29/09/2010 6 / 22

Quarterly employment and monthly unemployment in the euro area (a) Agriculture (b) Industry 7000 26000 6500 25000 6000 Quarterly employment Quarterly employment 24000 1995 2000 2005 2010 1995 2000 2005 2010 (c) Construction (d) TTC services 37500 11000 35000 10000 32500 Quarterly employment Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 (e) FBS services (f) Other services 45000 22500 42500 40000 17500 Quarterly employment 37500 Quarterly emplyment 1995 2000 2005 2010 1995 2000 2005 2010 (g) Total economy (h) Total Unemployment 150000 14000 140000 130000 Quarterly employment 12000 Monthly 1995 2000 2005 2010 1995 2000 2005 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 7 / 22

Quarterly employment and monthly unemployment in Belgium Figure: (b) Industry (a) Agriculture 100 700 90 650 80 Q ua rte rly e m ploym e nt Q ua rte rly e m ploym e nt 1995 2000 2005 2010 1995 2000 2005 2010 (c) Construction (d) TTC services 260 1050 250 1025 240 Q ua rte rly e m ploym e nt Q ua rte rly e m ploym e nt 1000 1995 2000 2005 2010 1995 2000 2005 2010 (e) FBS services (f) Other services 1500 900 1400 700 1300 Q ua rte rly e m ploym e nt Q ua rte rly e m ploym e nt 1995 2000 2005 2010 1995 2000 2005 2010 (h) Total U nemployment (g) Total economy 4500 400 4250 350 4000 300 Q ua rte rly e m ploym e nt Monthly 1995 2000 2005 2010 1995 2000 2005 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 8 / 22

Quarterly employment and monthly unemployment in Germany (a) Agriculture (b) Industry 1100 9000 1000 8500 900 Quarterly employment 8000 Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 (d) TTC services (c) Construction 10000 3000 9750 2500 9500 Quarterly employment Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 (c) FBS services (f) Other services 7000 12000 6000 11000 5000 Quarterly employment Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 (g) Total economy (h) Total Unemployment 40000 4500 39000 4000 38000 3500 Quarterly employment Monthly 1995 2000 2005 2010 1995 2000 2005 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 9 / 22

Quarterly employment and monthly unemployment in Spain (a) Agricolture (c) Industry 1100 3250 1000 3000 900 2750 Quarterly employment Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 6000 (c) Construction (d) TTC services 2500 2000 5000 1500 Quarterly employment Quarterly employment 4000 1995 2000 2005 2010 1995 2000 2005 2010 6000 (e) FBS services (f) Other services 2500 5000 2000 1500 Quarterly employment Quarterly employment 4000 1995 2000 2005 2010 1995 2000 2005 2010 (g) Total economy (h) Unemployment 20000 4000 17500 3000 15000 Quarterly employment Monthly 2000 1995 2000 2005 2010 1995 2000 2005 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 10 / 22

Quarterly employment and monthly unemployment in France (b) Industry (a) A gricolture 1100 4000 1000 3750 900 3500 Quarterly employment Quarterly employment 800 3250 1995 2000 2005 2010 1995 2000 2005 2010 (c) Construction (d) TTC services 1800 6000 1600 5500 Quarterly employment Quarterly employment 1400 1995 2000 2005 2010 1995 2000 2005 2010 (e) FBS services 5000 (f) Other services 9000 4500 8500 4000 8000 Quarterly employment Quarterly employment 3500 1995 2000 2005 2010 1995 2000 2005 2010 26000 3000 (g) Total economy (h) Total Unemployment 25000 2750 24000 2500 Quarterly employment Monthly 23000 2250 1995 2000 2005 2010 1995 2000 2005 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 11 / 22

Quarterly employment and monthly unemployment in Italy (b) Industry (a) Agricolture 5300 1300 5200 1100 Quarterly employment 5100 Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 (c) Construction 2000 (d) TTC services 6000 1800 1600 5500 Quarterly employment Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 4000 7500 (e) FBS services (f) Other services 3500 7000 3000 6500 2500 Quarterly employment Quarterly employment 1995 2000 2005 2010 1995 2000 2005 2010 (g) Total economy (h) Total Unemployment 2500 25000 2000 23000 Monthly Quarterly employment 1500 1995 2000 2005 2010 1995 2000 2005 2010 F.Moauro (Eurostat, unit D-5) 29/09/2010 12 / 22