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Forecasting the Index of Financial Safety (IFS) of South Africa using neural networks

Author

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  • Matkovskyy, Roman

Abstract

This paper investigates neural network tools, especially the nonlinear autoregressive model with exogenous input (NARX), to forecast the future conditions of the Index of Financial Safety (IFS) of South Africa. Based on the time series that was used to construct the IFS for South Africa (Matkovskyy, 2012), the NARX model was built to forecast the future values of this index and the results are benchmarked against that of Bayesian Vector-Autoregressive Models. The results show that the NARX model applied to IFS of South Africa and trained by the Levenberg-Marquardt algorithm may ensure a forecast of adequate quality with less computation expanses, compared to BVAR models with different priors.

Suggested Citation

  • Matkovskyy, Roman, 2012. "Forecasting the Index of Financial Safety (IFS) of South Africa using neural networks," MPRA Paper 42153, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42153
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    File URL: https://mpra.ub.uni-muenchen.de/42153/1/MPRA_paper_42153.pdf
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    References listed on IDEAS

    as
    1. Henry Kaiser, 1958. "The varimax criterion for analytic rotation in factor analysis," Psychometrika, Springer;The Psychometric Society, vol. 23(3), pages 187-200, September.
    2. Matkovskyy, Roman, 2012. "The Index of the Financial Safety (IFS) of South Africa and Bayesian Estimates for IFS Vector-Autoregressive Model," MPRA Paper 42173, University Library of Munich, Germany.
    3. Abdul d Abiad, 2003. "Early Warning Systems; A Survey and a Regime-Switching Approach," IMF Working Papers 03/32, International Monetary Fund.
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    Cited by:

    1. Majid Delavari & Nadiya Gandali Alikhani & Esmaeil Naderi, 2013. "Do Dynamic Neural Networks Stand a Better Chance in Fractionally Integrated Process Forecasting?," International Journal of Economics and Financial Issues, Econjournals, vol. 3(2), pages 466-475.
    2. Abounoori, Abbas Ali & Mohammadali, Hanieh & Gandali Alikhani, Nadiya & Naderi, Esmaeil, 2012. "Comparative study of static and dynamic neural network models for nonlinear time series forecasting," MPRA Paper 46466, University Library of Munich, Germany.
    3. Abounoori, Abbas Ali & Naderi, Esmaeil & Gandali Alikhani, Nadiya & Amiri, Ashkan, 2013. "Financial Time Series Forecasting by Developing a Hybrid Intelligent System," MPRA Paper 45860, University Library of Munich, Germany.

    More about this item

    Keywords

    Index of Financial Safety (IFS); neural networks; nonlinear dynamic network (NDN); nonlinear autoregressive model with exogenous input (NARX); forecast;

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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