Evolutionary Strategies ; a New Macroeconomic Policy Tool ?

Previous work has used neural networks to predict the rate of inflation in Taiwan using four measures of ‘money’ (simple sum and three Divisia measures). In this work a new approach is developed that uses an evolutionary strategy as a predictive tool. This approach is simple to implement yet produces results that compare favourably with the neural network predictions. Our preferred inflation forecasting model is achieved using networks that employ a Divisia M2 measure of money, adjusted to incorporate a learning mechanism to allow individuals to alter their perceptions of the increased productivity of money. We conclude with a discussion of the promise of evolutionary strategies as a new forecasting tool in the macroeconomic policy arena. Copyright 2001 IFAC