Typology of exchange rate forecasting methods

Abstract

Forecasts look for a conditional expected value and too often refer to linear regression models that are irrational from the point of view of time series. Simple averaging has its advantages, but it must take into account other external factors that may contradict the mathematical formulas and modeling schemes used. For this reason, the aim of this article is to present a typology of exchange rate forecasting methods as an interdisciplinary paradigmatic framework for optimizing the possibility of determining the price of a given monetary unit of a given country expressed in other monetary units. The hypothesis was adopted that the impact of fundamental categories on the exchange rate and its microstructure require the ability to alternate between quantitative and qualitative forecasting models and the theory of exchange rates in economic theory. The research limitation is the deliberate abandonment of forecast analyzes of the exchange rate using econometrics, the apparatus of mathematical economics, or the qualitative school of forecasting results themselves, in favor of an analysis of the literature on the subject of research and an attempt to subjectively and openly catalog them.

Keywords

• forecasting
• volatility
• liquidity management
• currency market