Enabling External Factors for Inflation Rate Forecasting Using Fuzzy Neural System

Abstract

Inflation is the tendency of increasing prices of goods in general and happens continuously. Indonesia's economy will decline if inflation is not controlled properly. To control the inflation rate required an inflation rate forecasting in Indonesia. The forecasting result will be used as information to the government in order to keep the inflation rate stable. This study proposes Fuzzy Neural System (FNS) to forecast the inflation rate. This study uses historical data and external factors as the parameters. The external factor using in this study is very important, which inflation rate is not only affected by the historical data. External factor used are four external factors which each factor has two fuzzy set. While historical data is divided into three input variables with three fuzzy sets. The combination of three input variables and four external factors will generate too many rules. Generate of rules with too many amounts will less effective and have lower accuracy. The novelty is needed to minimalize the amount of rules by using two steps fuzzy. To evaluate the forecasting results, Root Means Square Error (RMSE) technique is used. Fuzzy Inference System Sugeno used as the comparison method. The study results show that FNS has a better performance than the comparison method with RMSE that is 1.81.