FORECASTING FOREIGN EXCHANGE RESERVES USING BAYESIAN MODEL AVERAGING-NAÃ VE BAYES

Belã‰n Salas, David Alaminos, Manuel A. Fernã Ndez-Gã Mez and à Ngela Callejã“n
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Belã‰n Salas: PhD Program in Economics and Business and Department of Finance and Accounting, University of Málaga, Málaga, Spain
David Alaminos: ��PhD Program in Mechanical Engineering and Energy Efficiency and Department of Economic Theory and Economic History, University of Málaga, Málaga, Spain
Manuel A. Fernã Ndez-Gã Mez: ��Department of Finance and Accounting, University of Málaga, Málaga, Spain
à Ngela Callejã“n: ��Department of Finance and Accounting, University of Málaga, Málaga, Spain

The Singapore Economic Review (SER), 2025, vol. 70, issue 04, 929-951

Abstract: Foreign exchange reserves are used by governments to balance international payments and make stable the exchange rate. Numerous works have developed models to predict foreign exchange reserves; however, the existing models have limitations and the literature demands more research on the subject given that the accuracy of the models is still poor, and they have only been used for emerging countries. This paper presents a new prediction model of foreign exchange reserves for both emerging countries and developed countries, applying a method of Bayesian model averaging-Naïve Bayes, which shows better precision results than the individual classifier. Our model has a great potential impact on the adequacy of macroeconomic policy against the risks derived from balance of payment crises providing tools that help to achieve financial stability on a global level.

Keywords: Foreign exchange reserves; balance of payment; Bayesian model averaging; Naïve Bayes; forecasting (search for similar items in EconPapers)
JEL-codes: C11 C63 E5 F3 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S021759082048001X

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