Machine learning can improve inflation forecasts – IMF paper
Model for Japan is “easily interpretable” and overcomes some drawbacks of standard models
Machine learning (ML) models can improve inflation forecasts, economists at the International Monetary Fund have found.
Their new working paper, published on September 27, tests various types of ML models on Japanese data. The authors – Yang Liu, Ran Pan and Rui Xu – note that Japan, like many economies, has faced conditions in recent years that were difficult to forecast. Surging inflation was driven initially by cost-push factors, whereas demand-side factors are now more important.
“Both the
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