Application of GARCH Model in Forecasting IDR/USD Exchange Rate

Khairina Natsir

Abstract

Modeling and Forecasting the IDR to USD exchange rate is crucial in business as it provides information on the model of exchange rate fluctuation and taking the right financial decisions. Therefore, financial managers in a multinational company are required to be able to understand exchange rate forecasting in order to make financial decisions to optimize the value of the company. The purpose of this research is to do the modeling and forecasting of IDR exchange rate against USD using GARCH model. The GARCH model is a suitable model used for financial analysis because assuming the existence of heteroscedasticity not a problem but can be used to predict future price volatility. GARCH models pay attention to the variance and errors in doing the forecasting. The results showed that the GARCH model (1,1) was the best model in representing exchange rate movements during the study period. The result of forecasting of IDR to USD exchange rate for 5 days after the research period are 14065, 04072, 14078, 14084 and 14090.

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Paper Citation


in Harvard Style

Natsir K. (2018). Application of GARCH Model in Forecasting IDR/USD Exchange Rate.In Proceedings of the 7th International Conference on Entrepreneurship and Business Management - ICEBM Untar, ISBN 978-989-758-363-6, pages 168-174. DOI: 10.5220/0008490001680174


in Bibtex Style

@conference{icebm untar18,
author={Khairina Natsir},
title={Application of GARCH Model in Forecasting IDR/USD Exchange Rate},
booktitle={Proceedings of the 7th International Conference on Entrepreneurship and Business Management - ICEBM Untar,},
year={2018},
pages={168-174},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0008490001680174},
isbn={978-989-758-363-6},
}


in EndNote Style

TY - CONF

JO - Proceedings of the 7th International Conference on Entrepreneurship and Business Management - ICEBM Untar,
TI - Application of GARCH Model in Forecasting IDR/USD Exchange Rate
SN - 978-989-758-363-6
AU - Natsir K.
PY - 2018
SP - 168
EP - 174
DO - 10.5220/0008490001680174