Naslov
Neural network structure identification in inflation forecasting

Autori
Šestanović, Tea ; Arnerić, Josip

Izvornik
Journal of forecasting (0277-6693) 39 (2020), 6; 935-952

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
euro zone ; feedforward neural network ; inflation forecasting ; Jordan neural network

Sažetak
Neural networks (NNs) are appropriate to use in time series analysis under conditions of unfulfilled assumptions, i.e. non-normality and nonlinearity. The aim of this paper is to propose means of addressing identified shortcomings with the aim of identifying the NN structure for inflation forecasting. The research is based on a theoretical model that includes the characteristics of demand-pull and cost-push inflation ; i.e., it uses the labor market, financial and external factors, and lagged inflation variables. It is conducted at the aggregate level of euro area countries from January 1999 to January 2017. Based on the estimated 90 feedforward NNs (FNNs) and 450 Jordan NNs (JNNs), which differ in variable parameters (number of iterations, learning rate, initial weight value intervals, number of hidden neurons, and weight value of the context unit), the mean square error (MSE) and Akaike Information Criterion (AIC) are calculated for two periods: in-the-sample and out-of-sample. Ranking NNs simultaneously on both periods according to either MSE or AIC does not lead to the selection of the “best” NN, since the optimal NN in-the-sample, based on MSE and/or AIC criteria, often has high out- ofsample values of both indicators. To achieve the best compromise solution, i.e., to select an optimal NN, the PROMETHEE is used. Comparing the optimal FNN and JNN, i.e., FNN(4, 5, 1) and JNN(4, 3, 1), it is concluded that under approximately equal conditions, fewer hidden layer neurons are required in JNN than in FNN, confirming that JNN is parsimonious compared to FNN. Moreover, JNN has a better forecasting performance than FNN does.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA