Robo-Yellen? How Artificial Intelligence Could One Day Set Monetary Policy

Andrew Lo, director of the Laboratory for Financial Engineering at the Massachusetts Institute of Technology, has announced that, “The capability is here,” suggesting that, “The biggest hurdle is the cultural barrier. You’ve got a lot of central bankers who are not as open to technology.”  The use of computers to do economic modeling is not new, and is an important tool in answering specific questions, but predictions made using computers are often less accurate than that of their flesh and blood counterparts. Lo suggests that artificial intelligence, or AI, will bridge the gap, using the process whereby technology learns to do tasks for which it hasn’t been programmed. Called ‘machine learning,’the concept is already being applied to perform complex tasks, including classifying DNA sequences, detecting credit-card fraud, information retrieval, marketing, online advertising and stock market analysis. Michael Feroli, an economist at JPMorgan Chase & Co., believes the…


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