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Study of Discrete Choice Models and Adaptive Neuro-Fuzzy Inference System in the Prediction of Economic Crisis Periods in USA

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  • Eleftherios Giovanis

    ()
    (Royal Holloway University of London, Department of Economics, TW20 0EX, Egham, Surrey, United Kingdom)

Abstract

In this study two approaches are applied for the prediction of the economic recession or expansion periods in USA. The first approach includes Logit and Probit models and the second is an Adaptive Neuro-Fuzzy Inference System (ANFIS) with Gaussian and Generalized Bell membership functions. The in-sample period 1950-2006 is examined and the forecasting performance of the two approaches is evaluated during the out-of sample period 2007-2010. The estimation results show that the ANFIS model outperforms the Logit and Probit model. This indicates that neuro-fuzzy model provides a better and more reliable signal on whether or not a financial crisis will take place.

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Bibliographic Info

Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

Volume (Year): 42 (2012)
Issue (Month): 1 (March)
Pages: 79-96

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Handle: RePEc:eap:articl:v:42:y:2012:i:1:p:79-96

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Related research

Keywords: ANFIS; Discrete Choice Models; Error Back-propagation; Financial Crisis; Fuzzy Logic; US Economy;

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  1. Eleftherios Giovanis, 2010. "Application of logit model and self-organizing maps (SOMs) for the prediction of financial crisis periods in US economy," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 2(2), pages 98-125, June.
  2. Glick, R. & Moreno, R., 1999. "Money and Credit, Competitiveness, and Currency Crises in Asia and Latin America," Papers 99-01, Economisch Institut voor het Midden en Kleinbedrijf-.
  3. Fioramanti, Marco, 2008. "Predicting sovereign debt crises using artificial neural networks: A comparative approach," Journal of Financial Stability, Elsevier, vol. 4(2), pages 149-164, June.
  4. Asli Demirgüç-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 81-109, March.
  5. Pamela K. Coats & L. Franklin Fant, 1993. "Recognizing Financial Distress Patterns Using a Neural Network Tool," Financial Management, Financial Management Association, vol. 22(3), Fall.
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