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Forecasting inflation with thick models and neural networks

  • McAdam, Peter
  • McNelis, Paul

This paper applies linear and neural network-based “thick” models for forecasting inflation based on Phillips–curve formulations in the USA, Japan and the euro area. Thick models represent “trimmed mean” forecasts from several neural network models. They outperform the best performing linear models for “real-time” and “bootstrap” forecasts for service indices for the euro area, and do well, sometimes better, for the more general consumer and producer price indices across a variety of countries. JEL Classification: C12, E31

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 22 (2005)
Issue (Month): 5 (September)
Pages: 848-867

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Handle: RePEc:eee:ecmode:v:22:y:2005:i:5:p:848-867
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Granger, Clive W. J. & Jeon, Yongil, 2004. "Thick modeling," Economic Modelling, Elsevier, vol. 21(2), pages 323-343, March.
  2. Mankiw, N. Gregory & Reis, Ricardo, 2002. "What measure of inflation should a central bank target?," Working Paper Series 0170, European Central Bank.
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  9. Peter McAdam & Alpo Willman, 2004. "Supply, Factor Shares and Inflation Persistence: Re-examining Euro-area New-Keynesian Phillips Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 637-670, 09.
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  14. Pesaran, M.H. & Timmermann, A., 1990. "A Simple Non-Parametric Test Of Predictive Performance," Papers 29, California Los Angeles - Applied Econometrics.
  15. McAdam, Peter & Hughes Hallett, A J, 1999. " Nonlinearity, Computational Complexity and Macroeconomic Modelling," Journal of Economic Surveys, Wiley Blackwell, vol. 13(5), pages 577-618, December.
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  17. Zhang, Guoqiang & Eddy Patuwo, B. & Y. Hu, Michael, 1998. "Forecasting with artificial neural networks:: The state of the art," International Journal of Forecasting, Elsevier, vol. 14(1), pages 35-62, March.
  18. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
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