Forecasting output using oil prices: A cascaded artificial neural network approach

Farooq Malik, Mahdi Nasereddin

Research output: Contribution to journalArticlepeer-review

28 Scopus citations

Abstract

Recent evidence suggests that oil prices affect output of the economy in a non-linear complex fashion. However, there is no clear agreement on the unknown functional form. An application of artificial neural network for short-term forecasting of GDP using oil prices and utilizing cascaded learning is proposed. We find that the mean absolute forecasting error and the mean square forecasting error is reduced by applying cascaded neural network relative to conventional artificial neural networks and popular linear models. Results also indicate that the developed forecasting approach is useful and point to the potential of this methodology for other economic applications. Our results are important for improving economic forecasts and introduce oil prices as a strong candidate for future forecasting exercises.

Original languageEnglish (US)
Pages (from-to)168-180
Number of pages13
JournalJournal of Economics and Business
Volume58
Issue number2
DOIs
StatePublished - Mar 1 2006

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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