Dynamics of Greece's unemployment rate: effect of the economic crisis and forecasting models

This paper studies the effect of the economic crisis in the unemployment of Greece compared with the unemployment of EU17 (countries that have adopted the Euro as their official currency) through a quantitative approach. Specifically, the hysteresis of the unemployment rate was examined before and after the economic crisis. Moreover, the long-memory behaviour is determined before and after the crisis through the calculation of Hurst exponent with R/S method. The other major scope of this work is the development of forecasting models for the unemployment rate in Greece. Firstly, the classical ARIMA model is applied and then an autoregressive fractionally integrated moving average (FARIMA) model is achieved to take into account the long-memory dynamics. The insertion of long-memory dynamics improved the forecasting accuracy. Finally, a number of indices with a significant effect on unemployment rate were identified and several FARIMA models with these indices as external regressors were developed.