A System Dynamics Model Of Exchange Rate Determination And Forecasting

SEISENSE Journal of Management

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Field Value
Title A System Dynamics Model Of Exchange Rate Determination And Forecasting
Creator Khan, Aima
Subject Exchange Rates
system dynamics
fundamental factors
feedback relationships
Description Objective: The objective of this paper is to develop a model of exchange rate determination and forecasting to provide reasonable forecasts for the exchange rate to facilitate long-term investments.
Design: The study develops the model using the system dynamics method. Grounded on the fundamental theories, the model incorporates nonlinear feedback relationships of interest rate, inflation, per capita income, terms of trade, and oil prices with the exchange rate.
Findings: The simulation results indicate the robustness of the model to mimic not only the long term past behavior of the exchange rate but also its ability to provide a reliable long-term forecast for the exchange rate. The model is portable and applies to any oil-exporting country after calibration.
Policy Implications: The study has practical implications for individuals, businesses, and the Government because they are all influenced by the exchange rate movements. Specifically, this model provides a useful tool for long term strategic financial planning of oil firms.
Originality: The study develops a model for exchange rate accounting for nonlinear feedback relationships among the variables.
Date 2020-07-17
Type info:eu-repo/semantics/article
Peer Reviewed Article
Format application/pdf
Identifier http://journal.seisense.com/index.php/jom/article/view/367
Source SEISENSE Journal of Management; Vol. 3 No. 4 (2020): SEISENSE Journal of Management; 44-55
Language eng
Relation http://journal.seisense.com/index.php/jom/article/view/367/119
Rights Copyright (c) 2020 Aima Khan

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