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http://dx.doi.org/10.13106/jafeb.2021.vol8.no5.0221

Forecasting Chinese Yuan/USD Via Combination Techniques During COVID-19  

ASADULLAH, Muhammad (Department of Commercial & Professional Studies, Institute of Business Management (IoBM))
UDDIN, Imam (Department of Accounting & Finance, Institute of Business Management (IoBM))
QAYYUM, Arsalan (Department of Accounting & Finance, Institute of Business Management (IoBM))
AYUBI, Sharique (Department of Accounting & Finance, Institute of Business Management (IoBM))
SABRI, Rabia (Department of Commercial & Professional Studies, Institute of Business Management (IoBM))
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.5, 2021 , pp. 221-229 More about this Journal
Abstract
This study aims to forecast the exchange rate of the Chinese Yuan against the US Dollar by a combination of different models as proposed by Poon and Granger (2003) during the Covid-19 pandemic. For this purpose, we include three uni-variate time series models, i.e., ARIMA, Naïve, Exponential smoothing, and one multivariate model, i.e., NARDL. This is the first of its kind endeavor to combine univariate models along with NARDL to the best of our knowledge. Utilizing monthly data from January 2011 to December 2020, we predict the Chinese Yuan against the US dollar by two combination criteria i.e. var-cor and equal weightage. After finding out the individual accuracy, the models are then assessed through equal weightage and var-cor methods. Our results suggest that Naïve outperforms all individual & combination of time series models. Similarly, the combination of NARDL and Naïve model again outperformed all of the individual as well as combined models except the Naïve model, with the lowest MAPE value of 0764. The results suggesting that the Chinese Yuan exchange rate against the US Dollar is dependent upon the recent observations of the time series. Further evidence shows that the combination of models plays a vital role in forecasting which commensurate with the literature.
Keywords
Forecasting; Exchange Rate; Auto-Regressive; Naive; Exponential Smoothing;
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