Multi-Country and Multi-Horizon GDP Forecasting Using Temporal Fusion Transformers

This paper applies a new artificial intelligence architecture, the temporal fusion transformer (TFT), for the joint GDP forecasting of 25 OECD countries at different time horizons. This new attention-based architecture offers significant advantages over other deep learning methods. First, results are interpretable since the impact of each explanatory variable on each forecast can be calculated. Second, it allows for visualizing persistent temporal patterns and identifying significant events and different regimes. Third, it provides quantile regressions and permits training the model on multiple time series from different distributions. Results suggest that TFTs outperform regression models, especially in periods of turbulence such as the COVID-19 shock. Interesting economic interpretations are obtained depending on whether the country has domestic demand-led or export-led growth. In essence, TFT is revealed as a new tool that artificial intelligence provides to economists and policy makers, with enormous prospects for the future.