A New Forecasting Model for USD/CNY Exchange Rate
Chen Linna () and
Ying Fang ()
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Chen Linna: Xiamen University
Studies in Nonlinear Dynamics & Econometrics, 2012, vol. 16, issue 3, 1-20
This paper models the return series of USD/CNY exchange rate by considering the conditional mean and conditional volatility simultaneously. An index type functional-coefficient model is adopted to model the conditional mean part and a GARCH type model with a policy dummy variable is applied to the conditional volatility model. We show that the government policy indeed has an impact on the exchange rate dynamic. To evaluate the out-of-sample forecasting ability, a prediction interval is computed by employing nonparametric conditional quantile regression. Our method outperforms other popular models in terms of various criteria.
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Working Paper: A New Forecasting Model for USD/CNY Exchange Rate (2013)
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