ESTIMATION AND PREDICTION OF THE JAPANESE YEN/U.S. DOLLAR RATE USING AN ADAPTIVE TIME-VARYING MODEL

Abstract

This paper presents a new adaptive technique for forecasting the Yen/U.S. Dollar exchange rate. The proposed method assumes a time-varying model to describe the evolution of the exchange rate. Weekly predictions of the Yen/U.S. Dollar rate are dominated by weekly announcements of unexpected changes in the relative unemployment claims between the U.S. and Japan. Monthly predictions are more sensitive to monthly releases of the difference between the expected and announced value of the National Association of Purchasing Managers index. The predictive results of the proposed method are found more accurate than that of conventional ARMA techniques.

Citation

Abutaleb, A.S., Kumasaka, Y. and Papaioannou, M.G. (2003), "ESTIMATION AND PREDICTION OF THE JAPANESE YEN/U.S. DOLLAR RATE USING AN ADAPTIVE TIME-VARYING MODEL", Choi, J.J. and Hiraki, T. (Ed.) The Japanese Finance: Corporate Finance and Capital Markets in ... (International Finance Review, Vol. 4), Emerald Group Publishing Limited, Leeds, pp. 425-441. https://doi.org/10.1016/S1569-3767(03)04020-2