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Neural Network Learning for Nonlinear Economies

Julian Ashwin, Paul Beaudry and Martin Ellison
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Julian Ashwin: Maastricht University

No 2432, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Neural networks offer a promising tool for the analysis of nonlinear economies. In this paper, we derive conditions for the global stability of nonlinear rational expectations equilibria under neural network learning. We demonstrate the applicability of the conditions in analytical and numerical examples where the nonlinearity is caused by monetary policy targeting a range, rather than a specific value, of inflation. If shock persistence is high or there is inertia in the structure of the economy, then the only rational expectations equilibria that are learnable may involve inflation spending long periods outside its target range. Neural network learning is also useful for solving and selecting between multiple equilibria and steady states in other settings, such as when there is a zero lower bound on the nominal interest rate.

Keywords: inflation targeting; machine learning; neural networks; zero lower bound (search for similar items in EconPapers)
Pages: 40 pages
Date: 2024-07
New Economics Papers: this item is included in nep-big
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Related works:
Working Paper: Neural Network Learning for Nonlinear Economies (2024) Downloads
Working Paper: Neural Network Learning for Nonlinear Economies (2024) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2432

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