Economic Nowcasting with Long Short-Term Memory Artificial Neural Networks (LSTM)

Hopp Daniel ()
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Hopp Daniel: UNCTAD E-9042, Palais des Nations, 1211 Geneva 10, Switzerland.

Journal of Official Statistics, 2022, vol. 38, issue 3, 847-873

Abstract: Artificial neural networks (ANNs) have been the catalyst to numerous advances in a variety of fields and disciplines in recent years. Their impact on economics, however, has been comparatively muted. One type of ANN, the long short-term memory network (LSTM), is particularly well-suited to deal with economic time-series. Here, the architecture’s performance and characteristics are evaluated in comparison with the dynamic factor model (DFM), currently a popular choice in the field of economic nowcasting. LSTMs are found to produce superior results to DFMs in the nowcasting of three separate variables; global merchandise export values and volumes, and global services exports. Further advantages include their ability to handle large numbers of input features in a variety of time frequencies. A disadvantage is the stochastic nature of outputs, common to all ANNs. In order to facilitate continued applied research of the methodology by avoiding the need for any knowledge of deep-learning libraries, an accompanying Python (Hopp 2021a) library was developed using PyTorch. The library is also available in R, MATLAB, and Julia.

Keywords: Forecasting; machine learning; python (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:offsta:v:38:y:2022:i:3:p:847-873:n:8

DOI: 10.2478/jos-2022-0037

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