Advances and Applications in Statistics
Volume 48, Issue 1, Pages 49 - 67
(January 2016) http://dx.doi.org/10.17654/AS048010049 |
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FORECASTING THE EXCHANGE RATE OF THE EGYPTIAN POUND AGAINST THE U.S. DOLLAR: AN EMPIRICAL STUDY
Amr I. A. Elatraby and Hisham Mohamed Abdelaziz Saad
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Abstract: This study aims to forecast the exchange rate of the Egyptian pound against the U.S. dollar (LE/$US) for 12 months ahead using both technical and fundamental analysis. Monthly exchange rates were used covering the period from February 2003 to July 2014. Two statistical models were applied which were autoregressive integrated moving averages (ARIMA) model and a dynamic regression model that combines regression analysis with the ARIMA model. The first model serves as a technical analysis and the second model serves as a fundamental analysis. Several economic variables were included in the dynamic regression model. The results showed that the LE/$US exchange rate is predictable using both models. In addition, both models outperformed the random walk model and the dynamic regression model had the best forecasting performance based on different forecasting accuracy measures. |
Keywords and phrases: exchange rate forecasting, autoregressive integrated moving averages, ARIMA, dynamic regression, regression with ARIMA errors, technical analysis, fundamental analysis. |
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