Bundesbank paper uses neural networks for rate forecasting
Artificial neural networks outperform linear and non-linear functions, author says
Artificial neural networks may be the best tool for forecasting nominal interest rates, a working paper published by the Deutsche Bundesbank finds.
In Predicting monetary policy using artificial neural networks, Natascha Hinterlang compares different methods of policy rate forecasting. She uses data from 1987 to 2012, taken from the Federal Reserve’s “green book” of real-time data, to see how well different methods predict nominal interest rates.
She looks at the normal methods of using non
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