Nonlinear Time Series and Neural-Network Models of Exchange Rates between the US Dollar and Major Currencies

Allen, David E.; McAleer, Michael; Peiris, Shelton; Singh, Abhay Kumar

doi:10.3390/risks4010007

Cited by 13 publications

(7 citation statements)

References 13 publications

(11 reference statements)

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“…A consideration of the empirical studies has shown the effect of the fluctuation of exchange rates on exports, trade, investment, capital market, inflation, and employment growth-in developing and developed countries (Schnabl 2008;Jamil et al 2012;Rjoub 2012;Allen et al 2016;Alagidede and Ibrahim 2017;Dal Bianco and Loan 2017;Latief and Lefen 2018;Vo and Zhang 2019;Hatmanu et al 2020;Ioan et al 2020). However, the effect of exchange rate volatility on economic growth for CEE countries has been studied by few authors and there has been a lack of studies over recent years- (Ricardo et al 2007;Arratibel et al 2011).…”

Section: Introductionmentioning

confidence: 99%

The Effect of Exchange Rate Volatility on Economic Growth: Case of the CEE Countries

Morina

Hysa

Ergün

et al. 2020

JRFM

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The exchange rate is a key macroeconomic factor that affects international trade and the real economy of each country. The development of international trade creates conditions where volatility comes with the exchange rate. The purpose of this paper is to examine the effect of real effective exchange rate volatility on economic growth in the Central and Eastern European countries. Additionally, the effect, through three channels of influence on economic growth which vary on the measurement of exchange rate volatility, is examined. The study uses annual data for fourteen CEE countries for the period 2002–2018 to examine the nature and extends the impact of such movements on growth. The empirical findings using the fixed effects estimation for panel data reveal that the volatility of the exchange rate has a significant negative effect on real economic growth. The results appear robust with alternative measures of exchange rate volatility such as standard deviation and z-score. This paper suggests that policymakers should adopt different policies to keep the exchange rate stable in order to foster economic growth.

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Section: Introductionmentioning

confidence: 99%

The Effect of Exchange Rate Volatility on Economic Growth: Case of the CEE Countries

Morina

Hysa

Ergün

et al. 2020

JRFM

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“…Boston and Firtescu (2019) also concluded that interest rates affect the financial markets and create a competitive environment. Different researchers have also studied that there is an effect of EMU on exchange rate on investment, exports, employment growth, capital markets, and inflation (Ioan et al, 2020;Dal Bianco & Loan, 2017;Schnabl, 2008;Allen et al, 2016;Latief & Lefen, 2018;Rjoub, 2012;Hatmanu et al, 2020;Jamil et al, 2012;Alagidede & Ibrahim, 2017;Vo & Zhang, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

Common Currency Area in GCC Region: An Application of Euro Model

Ahmad¹

2021

AJIBM

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US Dollar (USD) is the most dominant currency encompassing 59.54% of the world reserve currency. Euro is the second one, which holds 20.57% share of world reserve currency. The recent studies reveal that the USD might not be the dominant world reserve currency in the future. Euro as a common regional currency is the only competitor of USD, which shows the strength of a unified regional currency. In 1981, the six rich oil states formed Gulf Cooperative Council (GCC); the countries include the Kingdom of Saudi Arabia, the State of Qatar, the Sultanate of Oman, the Kingdom of Bahrain, the State of Kuwait, and the United Arab Emirates. This establishment of GCC signifies the close cultural, economic and political link between the GCC countries. GCC countries have almost all essential ingredients required to establish a common currency area or monetary union. The researcher applied the European Monetary Union (EMU) model to GCC states to find out the feasibility of a common currency or monetary union between GCC states. Currently, EMU is the only example of successful implementation of common regional currency founded on Mundell's theory of Optimum Currency Area (OCA). The results obtained indicate that all the GCC states successfully fulfill the Euro criteria which are also called Maastricht criteria. The research has established that GCC countries are ripe for establishing a monetary union, especially if they follow the steps of EMU.

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“…Of all the methods and methodologies used in literature, three classes of models namely, stochastic models, Neural Network based models and Support Vector Regression based models were identified by [2] as the most popular ones for modelling financial time series. According to [3], [4], stochastic models such as random walk process and GARCH models could be used to represent time series. However, according to reference [5], GARCH models failed to capture the variations in the exchange rate series and concluded inefficient in forecasting exchange rates.…”

Section: Related Workmentioning

confidence: 99%

Financial Time Series Forecasting Using Empirical Mode Decomposition and FNN: A Study on Selected Foreign Exchange Rates

Nanthakumaran

Tilakaratne

2018

Int J on Adv. in ICT for Emerging Countries

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The exchange rate, an economic indicator of the country is the relative price of one country's currency in terms of another country's currency. The stability of the exchange rate is important for a stable economic growth. Exchange rate series are non-linear and non-stationary. The fluctuations in the forecasting exchange rate are very important to the economy of the country. Researchers have proposed many hybrid machine learning models to get a more accurate forecast. This study proposes a hybrid forecasting model using Empirical Mode Decomposition (EMD) and Feedforward Neural Network (FNN) for foreign exchange rates forecasting and comparing its performance with widely used Non-linear Autoregressive (NAR) and Support Vector Regression (SVR) models. EMD is used to decompose the original non-linear and non-stationary series into several Intrinsic Mode Functions (IMFs) and one residual. The hybrid model is then used to forecast the exchange rate with IMFs and residual obtained as inputs. Empirical results obtained from forecasting daily exchange rates of Sri Lankan Rupees to Euro and Yen showed that the proposed EMD-FNN model outperforms NAR and SVR models without time series decomposition.

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Nonlinear Time Series and Neural-Network Models of Exchange Rates between the US Dollar and Major Currencies

Cited by 13 publications

References 13 publications

The Effect of Exchange Rate Volatility on Economic Growth: Case of the CEE Countries

The Effect of Exchange Rate Volatility on Economic Growth: Case of the CEE Countries

Common Currency Area in GCC Region: An Application of Euro Model

Financial Time Series Forecasting Using Empirical Mode Decomposition and FNN: A Study on Selected Foreign Exchange Rates

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