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New Approaches to Forecasting Growth and Inflation: Big Data and Machine Learning

Author

Listed:
  • Sabyasachi Kar
  • Amaani Bashir
  • Mayank Jain

    (Institute of Economic Growth, Delhi)

Abstract

The use of big data and machine learning techniques is now very common in many spheres and there is growing popularity of these approaches in macroeconomic forecasting as well. Is big data and machine learning really useful in the prediction of macroeconomic outcomes? Are they superior in performance compared to their traditional counterparts? What are the tradeoffs that forecasters need to keep in mind, and what are the steps they need to take to use these resources effectively? We carry out a critical analysis of the existing literature in order to answer these questions. Our analysis suggests that the answer to most of these questions are nuanced, conditional on a number of factors identified in the study.

Suggested Citation

  • Sabyasachi Kar & Amaani Bashir & Mayank Jain, 2021. "New Approaches to Forecasting Growth and Inflation: Big Data and Machine Learning," IEG Working Papers 446, Institute of Economic Growth.
    • Handle: RePEc:awe:wpaper:446
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    References listed on IDEAS

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    More about this item

    Keywords

    Forecasting; Big Data; Machine Learning; Supervised Learning; Meta-analysis; Growth; Inflation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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