Exchange Rate YuYuan Liu Han Yu Yang Dennis Yue Jessica Chen Jo-Yu Mao

Introduction In finance, the foreign-exchange rate between two currencies specifies how much one currency is worth in terms of the other. It has a major impact on a country ’ s ability on importing and exporting, inflations, foreign investment, and foreign debts.

Introduction U.S. urges China to open currency exchange in order to balance import and export proportions.

Introduction Sets of data Trade-Weighted Index Japan United Kingdom Canada Dates: 1973:01 to 2006:03

Trade-Weighted Index

Regression on Time For TWI

TWI Series

Correlogram and Unit root test for TWI

First Differencing

Correlogram and Unit root test for DTWI

Fitting ARMA Model

Serial Correlation Test and Correlogram for MAone model Residuals

Diagnosis for ARMA model: Residuals Squared Series

Conditional Heteroscedasticity test: Correlogram of residuals squared and ARCH-test

Forecast of TWI

Japan

Regression on Time For Japan

Japan Series

Correlogram and Unit root test for Japan

First Differencing

Correlogram and Unit root test for DJapan

Fitting ARMA Model

Diagnosis of ARMA model: residuals graph and histogram

Diagnosis of ARMA model: Correlogram-Qstat of ARMA model & Serial correlation test

Diagnosis for ARMA model: Residuals Squared Series

Conditional Heteroscedasticity test: Correlogram of residuals squared and ARCH-test

The Arch-Garch Model

Diagnosis for ARCH model

Forecasting of Japan

Forecast of Japan

United Kingdom

Regression on Time For UK

UK Series

Correlogram and Unit root test for UK

First Differencing

Correlogram and Unit root test for DUK

Diagnosis of ARMA model: residuals graph and histogram

Diagnosis of ARMA model: Correlogram-Qstat of ARMA model & Serial correlation test

Diagnosis for ARMA model: Residuals Squared Series

Conditional Heteroscedasticity test: Correlogram of residuals squared and ARCH-test

ARCH-GARCH Model

Forecast of UK

Canada

Regression on Time For Canada

Canada Series

Correlogram and Unit root test for Canada

First Differencing

Correlogram and Unit root test for DCanada

Diagnosis of ARMA model: residuals graph and histogram

Diagnosis of ARMA model: Correlogram-Qstat of ARMA model & Serial correlation test

Diagnosis for ARMA model: Residuals Squared Series

Conditional Heteroscedasticity test: Correlogram of residuals squared and ARCH-test

ARCH-GARCH Model

Forecast of Canada

Conclusion Each of the four set shows a similar posture as against time Foreign exchange rate measures the country ’ s economic strength and currency purchasing power U.S. dollar may stay under pressure in the future year, it probably going to be less demand in Asian market, but it should be doing fine in Europe and North America

The End