There appeared to be a change in labour productivity growth in Norway (a fall in the growth rate) in the middle of the 2000s, followed by a slight recovery at the end of the period under consideration (1971-2011). The 2007-2009 financial and economic crisis in Norway (which resulted from the banking crisis) caused an even greater drop in labour productivity growth to the extent that it in 2008 it reached its lowest point over the last three decades. After 2008, labour productivity growth started to increase. In this paper, in order to forecast time-series labour productivity growth in Norway for the period 2012-2021, the ARIMA model is fitted to Norwegian time-series labour productivity growth data obtained in the period 1971-2011. Using the Box-Jenkins model selection methodology, ARIMA (1, 1, 1) with no constant is selected as an appropriate model. As the selected ARIMA model indicates, labour productivity growth in Norway shall continue to increase very slowly and will ultimately reach a non-zero constant in the forecast period (2012-2021) following its recovery after 2008. Long-term forecasts for time-series labour productivity growth in Norway using ARIMA (1, 1, 1) with no constant will also reach a non-zero constant. Initially, it might be concluded that slow technological development as a result of the 2007-2009 financial and economic crisis could explain the slowdown in the recovery of labour productivity growth both in the forecast period (2012-2021) and over the longer term. However, due to the fact that the 2007-2009 financial and economic crisis has changed the underlying process which Norwegian labour productivity growth rate followed in the immediately preceding period, and that a technological revolution, which can be considered as a contributing factor, also took place in that period, it seems unlikely that a single labour productivity growth time series will be rich enough to describe the variation in the data. From the data and the analysis performed, it seems plausible to conclude that the crisis has changed the underlying process determining the labour productivity growth rate in Norway (at least in the short term), and therefore forecasts based on such models are rather unreliable.
Oct 22, 2021
Oct 22, 2021
|Forecasting Labour Productivity Growth in Norway for the Period 2012-2021 Using ARIMA Models||Oct 22, 2021|