Machine learning forecasting in the macroeconomic environment: the case of the US output gap
Emmanouil Sofianos,
Christos Alexakis,
Periklis Gogas and
Theophilos Papadimitriou
Additional contact information
Emmanouil Sofianos: University of Strasbourg, CNRS
Christos Alexakis: ESC [Rennes] - ESC Rennes School of Business
Periklis Gogas: DUTH - Democritus University of Thrace
Theophilos Papadimitriou: DUTH - Democritus University of Thrace
Post-Print from HAL
Abstract:
This paper aims to forecast deviations of the US output measured by the industrial production index (IPI), from its long-run potential output, known as output gaps. These gaps are important for policymakers when designing relevant economic policies, especially when a negative output gap may show economic slack or underperformance, often associated with higher unemployment and low infation. We use a dataset that includes 32 explanatory economic and fnancial variables and 18 lags of the IPI, spanning the period from 2000:1 to 2022:12, resulting in 50 variables and 276 monthly observations. The dataset is fed to fve well-established machine learning (ML) methods, namely decision trees, random forests, XGBoost, long short-term memory (LSTM) and support vector machines (SVMs), coupled with the linear, the RBF and the polynomial kernel. Moreover, we use the standard elastic net logit method from the area of econometrics as a benchmark. Our results indicate that the tree-based ML techniques perform better in-sample, and the best overall forecasting model is the XGBoost achieving an out-of-sample accuracy of 91.67%.
Keywords: Output gap; US; Machine learning; Forecasting (search for similar items in EconPapers)
Date: 2025-01-09
References: Add references at CitEc
Citations:
Published in Economic Change and Restructuring, 2025, 58 (1), pp.9. ⟨10.1007/s10644-024-09849-w⟩
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04885268
DOI: 10.1007/s10644-024-09849-w
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).