Machine learning can produce better forecasts – RBI paper

The use of machine learning (ML) can produce forecasts that are more accurate than standard statistical methods, research published by the Reserve Bank of India finds.

In the working paper, authors Bhanu Pratap and Shovon Sengupta test a broad range of standard statistical forecasting techniques and several different types of ML algorithms, including decision trees and neural networks. They focus on forecasting CPI inflation and its components.

In their test, ML-based models “generally