A Comparative Analysis of Garch and Arima Models in Forecasting Zwl/Usd Exchange Rate Volatility, A Case of Zimbabwe
- Author
- Porotazio, Tanaka
- Title
- A Comparative Analysis of Garch and Arima Models in Forecasting Zwl/Usd Exchange Rate Volatility, A Case of Zimbabwe
- Abstract
-
This research is a comparative analysis of GARCH and ARIMA model in forecasting exchange rate
volatility in Zimbabwe the study applied GARCH (1, 1), Generalized Error Distribution and ARIMA (16,20)
models in forecasting ZWL/USD exchange rates volatility using performance evaluation techniques such
RMSE, Symmetric MAPE, AIC, BIC. The major objective was to compare the performance of these models
in predicting future exchange rates and to assist Zimbabwean policy makers, the Central Bank, the Ministry
of Finance and Economic Development and interested entities with recommendations. The research used
data of weekly exchange rates extracted from the Reserve Bank of Zimbabwe’s website which ranges from
January 2020 to November 2022. The forecasting was based on In-Sample and Out-Of-Sample predictive
horizon. Based on the findings, the study recommends the use of GARCH (1,1) Gaussian error distribution
for forecasting exchange rates since it had the lowest Symmetric MAPE, RMSE, AIC, BIC and RMS values. According to the findings, the research study further recommends the use of other currencies other than the
USD. A Rand Monetary Union was recommended to facilitate international trade with high hopes of
strengthening the value of ZWL - Date
- 2022
- Publisher
- BUSE
- Keywords
- Comparative Analysis
- Forecasting
- Supervisor
- Mr. Kusotera
- Item sets
- Department of Engineering and Physics
