A Neural Phillips Curve and a Deep Output Gap
Not on the map. Why?
Abstract (arXiv)
Many problems plague empirical Phillips curves (PCs). Among them is the hurdle that the two key components, inflation expectations and the output gap, are both unobserved. Traditional remedies include proxying for the absentees or extracting them via assumptions-heavy filtering procedures. I propose an alternative route: a Hemisphere Neural Network (HNN) whose architecture yields a final layer where components can be interpreted as latent states within a Neural PC. There are benefits. First, HNN conducts the supervised estimation of nonlinearities that arise when translating a high-dimensional set of observed regressors into latent states. Second, forecasts are economically interpretable. Among other findings, the contribution of real activity to inflation appears understated in traditional PCs. In contrast, HNN captures the 2021 upswing in inflation and attributes it to a large positive output gap starting from late 2020. The unique path of HNN's gap comes from dispensing with unemployment and GDP in favor of an amalgam of nonlinearly processed alternative tightness indicators.
Key facts. Cited by 5 papers in the map (data through 7 Oct 2026). Builds on 19 of its 143 references that are in the map. First posted on arXiv 8 Feb 2022.
Builds on
19 of 143 references.
References · 19
- 2016Simple and Scalable Predictive Uncertainty Estimation using Deep Ensemblescited by 3,888
- 2017Explanation in Artificial Intelligence: Insights from the Social Sciencescited by 1,201
- 2017DeepAR: Probabilistic Forecasting with Autoregressive Recurrent Networkscited by 1,004
- 2018Reconciling modern machine learning practice and the bias-variance trade-offcited by 919
- 2019Temporal Fusion Transformers for Interpretable Multi-horizon Time Series Forecastingcited by 748
- 2019Benign Overfitting in Linear Regressioncited by 544
- 2019Surprises in High-Dimensional Ridgeless Least Squares Interpolationcited by 508
- 2020Neural Additive Models: Interpretable Machine Learning with Neural Netscited by 318
- 2019Financial Time Series Forecasting with Deep Learning : A Systematic Literature Review: 2005-2019cited by 270
- 2020Double Trouble in Double Descent : Bias and Variance(s) in the Lazy Regimecited by 95
- 2013Early stopping and non-parametric regression: An optimal data-dependent stopping rulecited by 86
- 2019Deep Factors for Forecastingcited by 86
7 more
- 2020Can weight sharing outperform random architecture search? An investigation with TuNAScited by 68
- 2020How is Machine Learning Useful for Macroeconomic Forecasting?cited by 18
- 2020The Macroeconomy as a Random Forestcited by 15
- 2020Macroeconomic Data Transformations Mattercited by 7
- 2020Deep Dynamic Factor Modelscited by 6
- 2021Can Machine Learning Catch the COVID-19 Recession?cited by 6
- 2018Simultaneous Mean-Variance Regressioncited by 1
Built on by
Citing papers per year: 2023: 2; 2024: 1; 2025: 1; 2026: 1.
5 papers.
- 2023Maximally Machine-Learnable Portfolioscited by 3
- 2023From Reactive to Proactive Volatility Modeling with Hemisphere Neural Networkscited by 2
- 2024Maximally Forward-Looking Core Inflationcited by 1
- 2025Ordinary Least Squares as an Attention Mechanismcited by 0
- 2026Quantifying the Risk-Return Tradeoff in Forecastingcited by 0
- 2026Quantifying the Risk-Return Tradeoff in Forecasting10 May 2026
- 2025Ordinary Least Squares as an Attention Mechanism13 Apr 2025
- 2024Maximally Forward-Looking Core Inflation8 Apr 2024
- 2023From Reactive to Proactive Volatility Modeling with Hemisphere Neural Networks27 Nov 2023
- 2023Maximally Machine-Learnable Portfolios8 Jun 2023