NEURAL NETWORKS, ARIMA AND ARIMAX MODELS FOR FORECASTING INDONESIAN INFLATION

Suhartono* Abstract
The objective of this study is to apply Neural Networks (NN) model for forecasting Indonesian inflation and to compare a result with ARI A and ARI A! models" The #eedforward Neural Networks (##NN) model is the most popular form of artificial Neural Networks model used for forecasting$ particularly in economics and finance" This study focuses on the model building of ##NN as time series model and use inflation rates in Indonesia" A comparison is drawn between ##NN model$ and the best e%isting models are based on traditional econometrics time series approach$ namely ARI A and ARI A! models" The best models are selected based on forecasting ability by using the &' and R &'$ particularly on the dynamic forecast" The result shows that ##NN models outperform the traditional econometric time series model" Keywords: Feedforward Neural Networks, inflation, dynamic forecasting

Introduction
During the a!t "e# $ear!, the u!e o" the Neura Net#or%! &NN' in e(ono)i( iterature!, *arti(u ar $ in the area! o" "inan(ia !tati!ti(! an+ e,(hange rate! ha! gro#n an+ re(ei-e+ a great +ea o" attention. So)e *u/ i(ation! a/out it (an /e "oun+ in Re"ene! an+ White &0112', Kaa!hoe% an+ 3an Di4% &5660, 5665', 7a)i+ an+ I8/a &5669', an+ 3er!a(e et al. &5669'. Fee+"or#ar+ Neura Net#or%! &FFNN' )o+e i! the )o!t *o*u ar "or) o" NN )o+e ! u!e+ "or "ore(a!ting, *arti(u ar $ in e(ono)i(! an+ "inan(e. FFNN i! a ( a!! o" " e,i/ e non inear )o+e ! that (an +i!(o-er *attern! a+a*ti-e $ "ro) the +ata. The u!e o" the NN )o+e in a** ie+ #or% i! genera $ )oti-ate+ /$ a )athe)ati(a re!u t !tating that un+er )i + regu arit$ (on+ition!, a re ati-e $ !i)* e NN )o+e i! (a*a/ e o"
*

Le(turer at De*art)ent o" Stati!ti(!, In!titut Te%no ogi Se*u uh No*e)/er, Sura/a$a

SU7ARTONO

a**ro,i)ating an$ :ore ;)ea!urea/ e "un(tion to an$ gi-en +egree o" a((ura($ &!ee e.g. C$/en%o &0121', Funaha!hi &0121', 7orni% et al" &0121, 0116', an+ White &0116''. The in-e!tigation o" non inearitie! in ti)e !erie! +ata i! i)*ortant to )a(ro;e(ono)i( theor$ a! #e a! "ore(a!ting, a! i u!trate+, in !e)ina #or% /$ :ro(% an+ 7o))e! &011<', or :arnett et al" &566='. Re(ent $, )an$ !tu+ie! ha-e a** ie+ NN )o+e ! to )a(roe(ono)i( ti)e !erie!, *arti(u ar $ on the )o+e ing an+ "ore(a!ting in" ation. Se-era !tu+ie! a/out in" ation "ore(a!ting /$ u!ing NN (an /e "oun+ in S#an!on an+ White &011<', Mo!hiri an+ Ca)eron &011<', Sto(% an+ Wat!on &0112, 0111', Chen et al" &5660', Ka/un+i et al" &566=', an+ M(Ne i! et al" &5669'. Thi! *a*er +i!(u!!e! an+ in-e!tigate! the u!e"u ne!! o" FFNN "or "ore(a!ting in" ation in In+one!ia. T#o )ain i!!ue! that are !u!*e(te+ in" uen(ing in" ation are a !o !tu+ie+, i.e. the e""e(t o" in(rea!ing "ue *ri(e &a !o %no#n a! ::M' an+ the e""e(t o" I! a)i( Ca en+ar &*ri(e ten+ to in(rea!e +uring Ra)a+han an+ the Ei+! ho i+a$'. Fina $, a (o)*ari!on i! +ra#n /et#een FFNN )o+e an+ the /e!t e,i!ting )o+e ! /a!e+ on tra+itiona e(ono)etri(! ti)e !erie! a**roa(h.

Inflation Forecasting
The in-e!tigation a/out "ore(a!ting in" ation in a !*e(i"i( (ountr$ ha! re(ei-e+ a great attention "or )an$ )a(roe(ono)i(! re!ear(her!. For )o!t (entra /an%!, one o" )onetar$ *o i($ o/4e(ti-e! i! in" ation. Gi-en t$*i(a ti)e ag!, )onetar$ *o i($ nee+! to ta%e into (on!i+eration #ith "uture in" ation. Current in" ation e-e !, #hi(h are the)!e -e! the re!u t o" *a!t *o i(ie!, )a$ *ro-i+e on $ -ague in"or)ation. In" ation "ore(a!t! that in% "uture in" ation to (urrent +e-e o*)ent! (an /ri+ge thi! ga*. Thi! *a*er atte)*t! to +e-e o* an in" ation "ore(a!ting )o+e "or In+one!ia that (ou + !er-e a! an in*ut "or *o i($ !etting "or the :an% In+one!ia &:I'. Mo!hiri an+ Ca)eron &011<' +i+ a (o)*ari!on !tu+$ /et#een NN an+ e(ono)etri(! )o+e ! "or "ore(a!ting in" ation in Cana+a. Sto(% an+ Wat!on &0111' an+ Chen et al" &5660' ha-e !tu+ie+ NN "or "ore(a!ting in" ation in USA. Ka/un+i et al" &566=' +i!(u!!e+ an+ (o)*are+ /et#een NN an+ e(ono)etri(! )o+e ! "or "ore(a!ting in" ation in South A"ri(a. M(Ne i! an+ M(A+a) &5669' ha-e a !o !tu+ie+ a/out "ore(a!ting in" ation in USA, >a*an an+ !o)e Euro*ean (ountrie! /$ u!ing ?Thick odel@ an+ NN.

Neural Networks, ARIMA, and ARIMAX Models for Forecasting Indonesian Inflation

In In+one!ia, in" ation )o+e ing ha! /een !tu+ie+ /$ Arie" &011A' an+ Ang ing%u!u)o &566A'. Arie" &011A' u!e+ e(ono)etri(! a**roa(h /$ i)* e)enting three )o+e !B Mei!e )an )o+e , An+er!on;Karno!%$ )o+e , an+ Cau!a )o+e +e-e o*e+ /$ 7!iao. Ang ing%u!u)o &566A' i)* e)ente+ C;!tar )o+e "or )onetar$ in" ation ana $!i!.

1. Econometrics Time Series Approach

Mo+e ing an+ "ore(a!ting in" ation /$ u!ing e(ono)etri(! ti)e !erie! a**roa(h i! u!ua $ u!e+ /$ )an$ re!ear(her! in *a!t +e(a+e! e!*e(ia $ (o)*are #ith NN )o+e . In thi! !e(tion, #e #i gi-e a /rie" re-ie# o" !o)e "ore(a!ting )o+e ! "ro) e(ono)etri(! ti)e !erie! a**roa(h *arti(u ar $ ARIMA, Inter-ention Ana $!i! an+ Ca en+ar 3ariation Mo+e .

1.1. ARIMA Model

The ARIMA )o+e /e ong! to a "a)i $ o" " e,i/ e inear ti)e !erie! )o+e ! that (an /e u!e+ to )o+e )an$ +i""erent t$*e! o" !ea!ona a! #e a! non!ea!ona ti)e !erie!. The !ea!ona ARIMA )o+e (an /e e,*re!!e+ a!D &!ee e.g. :o, et al" &0119' an+ Wei &0116'' , &0' #here & i! the !ea!ona ength, , i! the /a(% !hi"t o*erator an+ t i! a !e8uen(e o" #hite noi!e! #ith Eero )ean an+ (on!tant -arian(e.
& d & * & p & , ' + & , '&0 , ' &0 , ' yt = ) & , ' ( & , 't

1.2. Intervention Anal sis Model

Inter-ention ana $!i! )o+e i! a ti)e !erie! )etho+ #hi(h i! u!ua $ u!e+ to e,* ain the e""e(t o" e,terna an+ interna "a(tor! to the ti)e !erie! +ata. So)e *a*er! a/out the a** i(ation o" inter-ention ana $!i! )o+e (an /e "oun+ in :o, an+ Tiao &01<A', :hatta(har$a an+ La$ton &01<1', Montgo)er$ an+ Weather/$ &0126', En+er! et al" &0116', Leonar+ &5660', Suhartono an+ 7ariroh &566=', Suhartono an+ Cutra &566A'. The genera ( a!! o" inter-ention ana $!i! )o+e ! (an /e #ritten a!D &!ee e.g. :o, et al" &0119' an+ Wei &0116''
-t =

) & , '( & , s ' s & , ' b , It + at r & ,' p & , '+ & , s '

&5'

#here b i! the ti)e +e a$ "or the inter-ention e""e(t an+ It i! inter-ention -aria/ e.

1.!. "alendar #ariation Model

SU7ARTONO

Ca en+ar -ariation e""e(t! )o+e #a! origina $ gi-en /$ :e an+ 7i )er &012='. Suhartono an+ Sa)*urno &5665' !tu+ie+ the e""e(t o" Ei+! ho i+a$ &a! I! a)i( (a en+ar e""e(t!' to the in(rea!ing nu)/er o" train an+ * ane *a!!enger! at >a%arta;Sura/a$a route /$ u!ing (a en+ar -ariation )o+e . Thi! a**roa(h #a! a !o u!e+ /$ :o%i an+ S(hi))e *"ennig &566A' "or "ore(a!ting in" ation in Ca%i!tan. In genera , the (a en+ar -ariation )o+e (an /e #ritten a! &!ee Cr$er &012F''
-t = 0. t +

) & , '( & , s ' p & , ' + & , s '

at

&='

#here 0 i! the e""e(t )agnitu+e o" (a en+ar -ariation -aria/ e an+ .t i! (a en+ar -ariation -aria/ e.

2. Feedfor$ard %eural %et$or&

Neura Net#or%! &NN' are a ( a!! o" " e,i/ e non inear )o+e ! that (an +i!(o-er *attern! a+a*ti-e $ "ro) the +ata. Theoreti(a $, it ha! /een !ho#n that gi-en an a**ro*riate nu)/er o" non inear *ro(e!!ing unit!, #e (an earn "ro) e,*erien(e an+ e!ti)ate an$ (o)* e, "un(tiona re ation!hi* #ith high a((ura($. E)*iri(a $, nu)erou! !u((e!!"u a** i(ation! ha-e e!ta/ i!he+ their ro e "or *attern re(ognition an+ ti)e !erie! "ore(a!ting. Fee+"or#ar+ Neura Net#or%! &FFNN' i! the )o!t *o*u ar NN )o+e ! "or ti)e !erie! "ore(a!ting a** i(ation!. Figure 0 !ho#! a t$*i(a three; a$er FFNN u!e+ "or "ore(a!ting *ur*o!e!. The in*ut no+e! are the *re-iou! agge+ o/!er-ation!, #hi e the out*ut *ro-i+e! the "ore(a!t "or the "uture -a ue!. 7i++en no+e! #ith a**ro*riate non inear tran!"er "un(tion! are u!e+ to *ro(e!! the in"or)ation re(ei-e+ /$ the in*ut no+e!. The )o+e o" FFNN in "igure 0 (an /e #ritten a!
) p +t , yt = 6 + j f y + ij t i oj j =0 i =0

&9'

#here p i! the nu)/er o" in*ut no+e!, ) i! the nu)/er o" hi++en no+e!, f i! a !ig)oi+ tran!"er "un(tion !u(h a! the ogi!ti(D
f & %' = 0 0 + e %

&A'

H j , j = 6,0, , )G i! a -e(tor o" #eight! "ro) the hi++en an+ H ij , i = 6,0, , pB j =0,5, , )G are #eight! "ro) the

to out*ut no+e! in*ut to hi++en no+e!. Note that e8uation &9' in+i(ate! a inear tran!"er "un(tion i! e)* o$e+ in the out*ut no+e.

Neural Networks, ARIMA, and ARIMAX Models for Forecasting Indonesian Inflation

ij

j
Output Layer (Dependent Var.)

Input Layer ( ag Dependent Var.) Hidden Layer (! unit neurons)

Jt y

Figure 1. Architecture of %eural %et$or& Model $ith Single 'idden (a er Fun(tiona $, the FFNN e,*re!!e+ in e8uation &9' i! e8ui-a ent to a non inear AR )o+e . Thi! !i)* e !tru(ture o" the net#or% )o+e ha! /een !ho#n to /e (a*a/ e o" a**ro,i)ating ar/itrar$ "un(tion &!ee e.g. C$/en%o &0121', Funaha!hi &0121', 7orni% et al" &0121, 0116', an+ White &0116''. 7o#e-er, "e# *ra(ti(a gui+e ine! e,i!t "or /ui +ing a FFNN "or a ti)e !erie!, *arti(u ar $ the !*e(i"i(ation o" FFNN ar(hite(ture in ter)! o" the nu)/er o" in*ut an+ hi++en no+e! i! not an ea!$ ta!%.

Research Methodolog
The *ur*o!e o" thi! re!ear(h i! to *ro-i+e e)*iri(a e-i+en(e on the (o)*arati-e !tu+$ /et#een FFNN an+ tra+itiona e(ono)etri(! ti)e !erie! )o+e "or "ore(a!ting in" ation in In+one!ia. The )a4or re!ear(h 8ue!tion! #e in-e!tigate areD &i'. Doe! FFNN ha-e a /etter re!u t on the a((ura($ "or "ore(a!ting in" ation in In+one!ia than tra+itiona e(ono)etri(! ti)e !erie! )o+e I &ii'. 7o# to /ui + the /e!t FFNN )o+e "or "ore(a!ting in" ation in In+one!iaI

SU7ARTONO

)ata
The In+one!ian in" ation +ata that #ere u!e+ in thi! e)*iri(a !tu+$ (ontain <F )onth o/!er-ation!, !tarte+ "ro) >anuar$ 0111 an+ en+e+ in A*ri 566A. The "ir!t <5 +ata o/!er-ation! are u!e+ "or )o+e !e e(tion an+ *ara)eter e!ti)ation &training +ata in ter) o" NN )o+e ' an+ the a!t 9 *oint! are re!er-e+ a! the te!t "or "ore(a!ting e-a uation an+ (o)*ari!on &te!ting +ata'. Figure 5 * ot! re*re!entati-e ti)e !erie! o" thi! +ata. It i! ( ear that the !erie! ha! a !tationar$ (on+ition #ith itt e !ea!ona -ariation!.

Figure 2. Time Series *lot of the Indonesian Inflation+ started from ,anuar 1--- to April 2../

Research )esign
In thi! re!ear(h, "our t$*e )o+e ! "or "ore(a!ting in" ation in In+one!ia are a** ie+ an+ (o)*are+ /$ i)* e)enting !tati!ti(a *a(%age MINITA: an+ SAS "or e(ono)etri(! ti)e !erie! )o+e ! an+ u!ing S;C u! an+ MATLA: "or FFNN )o+e !. Tho!e )o+e ! are ARIMA, Co)/ination /et#een Inter-ention an+ 3ariation Ca en+ar Mo+e !, FFNN #ith in*ut a!

Neural Networks, ARIMA, and ARIMAX Models for Forecasting Indonesian Inflation

ARIMA an+ FFNN #ith in*ut a! Co)/ination Inter-ention an+ Ca en+ar 3ariation Mo+e !. To +eter)ine the /e!t )o+e , an e,*eri)ent i! (on+u(te+ #ith the /a!i( (ro!! -a i+ation )etho+. The a-ai a/ e training +ata i! u!e+ to e!ti)ate the *ara)eter! &#eight!' "or an$ !*e(i"i( )o+e . The te!ting !et i! the u!e+ to !e e(t the /e!t )o+e a)ong a )o+e ! (on!i+ere+. In thi! !tu+$, the nu)/er o" hi++en no+e! "or FFNN )o+e -arie! "ro) 0 to F #ith an in(re)ent o" 0. The FFNN )o+e u!e+ in thi! e)*iri(a !tu+$ i! the !tan+ar+ FFNN #ith !ing e;hi++en; a$er !ho#n in Figure 0. The initia -a ue i! !et to ran+o) #ith re* i(ation! in ea(h )o+e to in(rea!e the (han(e o" getting the g o/a )ini)u). We +i+ not u!e the !tan+ar+ +ata *re*ro(e!!ing in NN /$ tran!"or) +ata to K;0,0L an+ N&6,0' !(a e, /e(au!e +ata in" ation -arie! aroun+ 6. The *er"or)an(e o" in;!a)* e "it an+ out;!a)* e "ore(a!t i! 4u+ge+ /$ the (o))on $ u!e+ error )ea!ure!. The$ are the )ean !8uare+ error &MSE' an+ the root )ean !8uare error &RMSE'.

Empirical Results
In thi! !e(tion the e)*iri(a re!u t! "or ARIMA, Co)/ination Inter-ention an+ 3ariation Ca en+ar &"or !i)* i(it$ #e #rite ARIMAX' an+ FFNN )o+e ! are *re!ente+ an+ +i!(u!!e+.

1. Results of ARIMA Model

The i+enti"i(ation !te* !ho#! that the auto(orre ation "un(tion &ACF' (ut! o"" a"ter ag 0 an+ !igni"i(ant at ag 00 an+ 05, #hi e the *artia auto(orre ation "un(tion &CACF' a !o (ut! o"" a"ter ag 0 an+ !igni"i(ant at ag 06, 00 an+ 0=. Thi! !ugge!t! that !ea!ona ARIMA )o+e !hou + /e u!e+ "or the +ata. We e!ti)ate eight ARIMA )o+e ! #ith !ea!ona ength 00 an+ 05. The re!u t! o" "ore(a!t (o)*ari!on /$ u!ing MSE an+ RMSE (riteria !ho# that ARIMA&0,6,6'&0,6,6'00 i! the /e!t )o+e "or out;!a)* e "ore(a!t &te!ting +ata', #hi e ARIMA&6,6,0'&6,6,0'05 i! the /e!t )o+e "or in;!a)* e "ore(a!t &training +ata', a! !ho#n in ta/ e 0. Fro) thi! ta/ e, #e (an a !o o/!er-e that out;!a)* e "ore(a!t o" ARIMA )o+e ! $ie + greater error! than in;!a)* e "ore(a!t.

SU7ARTONO

Ta0le 1. The Results of ARIMA Models+ 0oth in Training and Testing )ata
MSE Model Training data 6.=A<F 6.5F59 Testing data 6.F25F92 6.25<15A RMSE Training data 6.A1<11< 6.A055A6 Testing data 6.25F55A 6.161169

ARIMA&0,6,6'&0,6,6'00 ARIMA&6,6,0'&6,6,0'05

2. Results of ARIMA1 Model

Ta/ e 5 !ho#! the re!u t! o" three ARIMAX )o+e ! that !ati!"$ a+e8uate )o+e /$ te!ting *ara)eter )o+e an+ +iagno!ti( (he(% o" re!i+ua )o+e . Fro) Ta/ e 5, #e (an (on( u+e that inter-ention -aria/ e an+ I! a)i( (a en+ar !igni"i(ant $ in" uen(e the in(rea!ing o" "ore(a!t a((ura($, *arti(u ar $ in out;!a)* e "ore(a!t. Ta0le 2. The results of ARIMA1 models+ 0oth in training and testing data
MSE Model Mo+e 0 Mo+e 5 Mo+e = Training data 6.52F5F0F< 6.51F=95F= 6.51=A1026 Testing data 6.521F65 6.596<59 6.=01=6= RMSE Training data 6.A=A6=9 6.A99=<9 6.A90290 Testing data 6.A=209< 6.916F=F 6.AFA6F1

The!e three )o+e ! (ontain the e""e(t o" in(rea!ing ::M *ri(e an+ I! a)i( (a en+ar to in" ation +ata * u! ARIMA )o+e "or the error!, i.e. ARIMA&6,6,K0,05L', ARIMA&6,6,0'&6,6,0'05 an+ ARIMA&0,6,6'&6,6,0'05 "or )o+e 0, 5 an+ = re!*e(ti-e $. For e,a)* e, )o+e 0 (an /e "or)u ate+ a! yt = 6.9A6F + 6.22AAF I t + 6.2AF=9. t + &0 + 6.A000, + 6.51<F ,05 'at &F' #here I t i! inter-ention -aria/ e &in(rea!ing o" ::M *ri(e', . t i! I! a)i( (a en+ar -aria/ e an+ , i! /a(%!hi"t o*erator. Thi! )o+e !ho#! that in(rea!ing the *ri(e o" ::M an+ the I! a)i( Ca en+ar &Ra)a+han an+ Ei+! ho i+a$' rai!e+ the in" ation e""e(t in In+one!ia.

Neural Networks, ARIMA, and ARIMAX Models for Forecasting Indonesian Inflation

!. Results of FF%% Model

In thi! *a*er, /ui +ing *ro(e!! "or FFNN )o+e *arti(u ar $ +eter)ination o" in*ut! are /a!e+ on the in*ut! o" ARIMA an+ ARIMAX )o+e !. Ta/ e = !u))ariEe! the re!u t! o" FFNN "ore(a!ting #ith in*ut ag! /a!e+ on ARIMA an+ ARIMAX )o+e !. Ta0le !. The Results of FF%% Models+ 0oth in Training and Testing data
Model FFNN wit" input lags #ased on ARIMA Input lags $,$% %um0er of neurons $ % & ' $ % & ' ( $ % & ' ( $ % & ' ( Training data MSE ).&$)(&*+ ).&)&$*%& ).%,('&'$ ).%)(-%$+ ).%)*+$-, ).$,+$-$$ ).$-&*&-% ).$'$,'() ).$%&('+% ).%%%+*'$ ).%)')(%, ).$'++*,& ).$&**-*( ).$%$),), ).%+()+)( ).$(&$$,).$'-$-%' ).%%)%)*) ).$%%',(% RMSE ).((-%(, ).(()*)% ).(&'%*) ).'(&(** ).'(',,% ).'&'+&, ).'$**+, ).&-**%& ).&($'+* ).'-%$+$ ).'($-%% ).&,-%().&*+*+, ).&'-+*).('&%%% ).&+$&)' ).&,&*&$ ).'*+%*$ ).&'++-+ Testing data MSE ).-%(-(&).-)*'$,) ).-(-+$-% $.)+,')() ).,*(-'+, ).,&&-%-& ).'-$$-)+ ).,%)('+$.&$',(*) ).&*-),)).&$%%',, ).%*)$%') ).%%*$))$ ).%+-&,(* ).&'*$&'% ).&*)&'%% ).')*'%+).&%$)-%, ).('-*$&+ RMSE ).,($+$ ).,')'+ ).,-)(, $.)',)( ).+&)'* ).+$&)+ ).*,*'% ).+)(,' $.$'**).*)(,-% ).((,-+% ).($))%' ).'-(()) ).('(&&$ ).(,,&&% ).*))%,( ).*&-($, ).(***&& ).-')))+

$,$$,$%

FFNN wit" input lags #ased on ARIMAX

$,$%

It

.t

$,$$,$%

It

.t

The re!u t! !ho# that the )ore (o)* e, o" FFNN ar(hite(ture &it )ean! the )ore nu)/er o" unit no+e! in hi++en a$er' a #a$! $ie +! /etter re!u t in training +ata, /ut the o**o!ite re!u t ha**ene+ in +ata te!ting. Moreo-er, FFNN )o+e ! #ith in*ut ag! /a!e+ on ARIMAX )o+e gi-e /etter "ore(a!t than ARIMA )o+e . It (an /e ( ear $ !een "ro) the re+u(tion o" MSE an+ RMSE *arti(u ar $ in +ata te!ting.

SU7ARTONO

2. Results of "omparison Stud

We (on(entrate on the +$na)i( "ore(a!t! &+ata te!ting' to (hoo!e the /e!t )o+e "or "ore(a!ting in" ation in In+one!ia. The (o)*ari!on !tu+$ u!e! MSE +ata te!ting "ro) the /e!t )o+e in ea(h a**roa(h an+ a !o ratio o" "ore(a!t error! o" ea(h )o+e to the "ore(a!t error o" the FFNN )o+e #ith ag! in*ut /a!e+ on ARIMAX )o+e . The re!u t! are *re!ente+ in Ta/ e 9. Ta0le 2. Summar of ) namic Forecasting *erformance "omparison
:e!t Mo+e ARIMA ARIMAX FFNN #ith in*ut /a!e+ on ARIMA FFNN #ith in*ut /a!e+ on ARIMAX MSE &+ata te!ting' 6.F25F926 6.596<596 6.9<00<61 6.55F0660 Ratio MSE &to FFNN /a!e+ on ARIMAX' =.65 0.6< 5.62 0.66

In Ta/ e 9, nu)/er! greater than one on the ratio (o u)n in+i(ate *oorer "ore(a!t *er"or)an(e than (o)*ara/ e FFNN #ith in*ut! /a!e+ on ARIMAX )o+e an+ -i(e -er!a. :a!e+ on the re!u t at thi! ta/ e, #e (an (on( u+e that FFNN #ith in*ut! /a!e+ on ARIMAX )o+e , that i! in*ut ag! 0, 05, I t , . t an+ 9 unit neuron! in hi++en a$er, gi-e! the /e!t +$na)i( "ore(a!t &+ata te!ting' "or in" ation +ata. The re!u t! a !o !ho# that the "ore(a!t a((ura($ o" ARIMAX )o+e i! 8uite !i)i ar #ith the re!u t o" FFNN #ith in*ut /a!e+ on ARIMAX. Thi! re!u t gi-e! an o**ortunit$ "or "urther re!ear(h /$ i)* e)enting inearit$ te!t /e"ore a** $ing FFNN to in" ation +ata.

"onclusions
:a!e+ on the re!u t! at the *re-iou! !e(tion, #e (an (on( u+e that the FFNN #ith in*ut! !u(h a! the Co)/ination Inter-ention an+ Ca en+ar 3ariation Mo+e gi-e! the /e!t re!u t "or "ore(a!ting in" ation in In+one!ia. The re!u t a !o !ho#! that the /e!t FFNN )o+e in training +ata ten+! to $ie + o-er"itting on te!ting. Thi! re!u t gi-e! an o**ortunit$ to +o "urther

Neural Networks, ARIMA, and ARIMAX Models for Forecasting Indonesian Inflation

re!ear(h /$ i)* e)enting !o)e NN )o+e !e e(tion *ro(e+ure! a! e,* aine+ in An+er! an+ Korn &0111'. The re!u t! a !o !ho# that the "ore(a!t a((ura($ o" ARIMAX )o+e i! !i)i ar #ith the re!u t o" FFNN #ith in*ut /a!e+ on ARIMAX. Further re!ear(h a/out the e""e(t o" inearit$ te!t in in" ation +ata )o+e ing /$ u!ing FFNN a !o (an /e +one.

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