IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Modelling Rule- and Experience-Based Expectations Using Neuro-Fuzzy-Systems

Listed author(s):
  • Stefan Kooths


    (Westfälische Wilhelms-Universität)

Expectations modelling in macroeconomic theory is often done under restrictive assumptions regarding people's ability to learn and the level of their knowledge. Either it is assumed that people do not learn at all, which justifies the use of simple autoregressive forecasting methods, or the model makers believe that the relevant agents know everything about the (long-term) behaviour of the economic system (rational expectations). Neither of these seems realistically to describe what people really do in anticipating future developments when making current decisions. The lack of an adequate expectations model is especially problematic in business cycle theory where expectations play a dominant role in the cyclical behaviour of main macroeconomic indicators. This paper provides a more realistic description of human forecasting behaviour by using neuro-fuzzy-systems to model economic expectations in a simulation environment. Fuzzy-rules allow the expression of vague knowledge, e.g. "IF the money supply is fairly high and the unemployment rate is rather low THEN inflation tends to rise considerably." This approach, then, assumes that people know something about economic dependencies but that they are not informed of the exact formulas. Neuro-methods are able to train on what people mean when they qualify a certain growth rate of money supply in terms such as "fairly high" or "very low." These two techniques are hybridized as a neuro-fuzzy-system called the "Neuro-Fuzzy Expectation Generator (NFEG)." This module is connected to a business cycle simulation model using MAKROMAT-nfx (designed for WinNT 4.0 and Win98). This software allows us to analyze how the NFEG interacts with the economic system when the later is exposed to exogenous shocks. Since traditional forms of expectations modelling are also implemented in the software, interesting comparisons between rule- and experience-based expectations and autoregressive or rational expectations are possible as well.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: main text
Download Restriction: no

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 1999 with number 1032.

in new window

Date of creation: 01 Mar 1999
Handle: RePEc:sce:scecf9:1032
Contact details of provider: Postal:
CEF99, Boston College, Department of Economics, Chestnut Hill MA 02467 USA

Fax: +1-617-552-2308
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sce:scecf9:1032. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.