The European Central Bank (ECB) is currently using ChatGPT to increase the accuracy of GDP growth predictions for the eurozone, according to research published in Frankfurt on Thursday.
Instead of being overwhelmed by a large volume of data, the study indicated that the bank only used two pages of reports from the Purchasing Managers' Index (PMI), and the results were indeed effective.
These brief commentary snippets were fed into ChatGPT, which generated 'activity sentiment scores' and then incorporated them into the current GDP prediction model. The prediction results improved markedly.
The application of this new artificial intelligence is part of the ECB's ongoing trend of automation and machine learning. For many years, the bank has been leveraging web data and using large models to classify economic information. But this is the first time the bank has tested ChatGPT with PMI text, focusing entirely on storytelling, nuances, and anecdotes in the reports.
ECB economist asserts ChatGPT enhances prediction accuracy
The research indicates that current GDP prediction models are difficult to surpass, but the scores generated by ChatGPT have improved prediction quality. Accordingly: “The most convincing result is that improving the PMI text score on two GDP prediction standards significantly enhances prediction accuracy.”
Notably, with just two pages of text instead of millions of articles, the system has created added value. Researchers stated: “Just two pages of text instead of millions of articles are sufficient to enhance the prediction standards that are very hard to surpass.”
This system does not replace hard data such as retail figures or industrial output. But it speeds up processing. By assessing nuances and sentiments in real-time, the ECB receives quicker signals about whether economic activity is heating up or cooling down, before the delayed official data is available. The key message: fast signals, more accurate predictions.
However, even with a powerful AI setup, the bank's predictions still face many real-world pressures. ECB Vice President Luis de Guindos warned that Middle Eastern conflicts and energy prices could disrupt growth.
Luis stated that oil prices surged after Israel attacked Iran earlier this month, although they have slightly decreased. He emphasized that energy costs remain unstable: “The Israel-Iran conflict creates much uncertainty for oil price developments.”
He warned that these fluctuations could impact growth in the eurozone and affect inflation. “Therefore, it is necessary to closely monitor real economic developments to assess inflation prospects.”
He also affirmed the eurozone's reliance on oil and gas imports, compared to the United States, causing prices to rise like an additional tax, negatively impacting households and businesses, which slows down growth. Although the EU is developing renewable energy, risks from imported energy remain significant.
Tariffs, inflation, and the ECB's interest rate decisions
Luis also warned that trade tensions could create additional risks. Higher tariffs on European exports to the United States could lead to lower inflation, not due to better monetary policy but because of slower growth. “Higher tariffs are predicted even with favorable bilateral negotiations,” he said. This poses significant pressure on the ECB's objectives.
Earlier this month, the ECB lowered the key interest rate for the eighth time and hinted that the rate-cutting cycle may soon come to an end. In May, inflation fell below the bank's target of 2%. Luis appeared optimistic but still cautious: “We believe we are very close to the target. We are in a good position.”
However, the possibility of continuing to lower interest rates if energy and trade pull inflation down more significantly cannot be ruled out.
He also emphasized that the eurozone needs deeper integration. The way to cope with chaos from war to energy and economic shocks is 'more Europe.' This is about breaking down barriers between EU countries, building a common market for banking, savings, and investment. Luis stressed: 'We must prioritize European interests over national interests.'
Source: https://tintucbitcoin.com/ecb-dung-chatgpt-nang-do-chinh-xac-gdp/
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