Answer to Question #177320 in Economics for Nga

Question

The table shows that 1 US dollar was equivalent to 1.256 Australian dollars in January 2018.

a. Evaluate the components of time series of average monthly exchange rate

b. Smooth out the patterns that includes everything the model learned so far based on history record of the exchange rate. The forecast in the first month was 1.235. You are free to choose the suitable coefficient to conduct the model. Explain the decision on the coefficient

c. Would you apply the method in part (b) to forecast the monthly exchange rate for 2020? Please suggest and conduct all possible techniques that may apply to predict monthly foreign exchange rate in Year 3.

d. Compare the forecasting results of different techniques applied in part (c). Which ones yield more accurate results?

Year 1 Year 2

Jan  1.256 1.542

Feb  1.356 1.567

Mar 1.305 1.531

Apr 1.32 1.601

May 1.363 1.702

Jun 1.302 1.715

Jul 1.398 1.657

Aug 1.534 1.795

Sep 1.456 1.765

Oct 1.501 1.745

Nov 1.491 1.799

Dec 1.601 1.802

Answer 1

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