Due to the COVID-19 financial losses, the worldwide stock exchange markets were also affected. Prevention methods such as social distance and lockdowns have been adopted, but such policies were costly in the form of lower sales and even permanent closure of different firms. The global economy and financial markets have been shaken due to the COVID-19 pandemic. In addition, media reports claim that the currency was allowed to depreciate because of “payment pressure.” To fill the gap left by a declining currency reserve, countries must raise their exports, which will likely rise because of the currency's depreciation. Pakistan's foreign exchange reserves have fallen from $17.4 billion in 2017 to $12.1 billion due to an increase in the current account deficit. In the financial year 2017–18, Pakistan faced almost $12 billion in deficit in the balance of payments, which represents 4% of GDP, according to media sources quoted by financial experts. Furthermore, the budget deficit and balance of payments situation in Pakistan are not encouraging. Still, the most significant ones include the trade imbalance, stagnant exports, increased imports, and increased domestic consumption that led to greater demand for dollars. Several causes led to the depreciation of the Pakistani currency. The Pakistani currency started losing its value rapidly to other currencies, especially the US dollar and British pounds. In the beginning, Pakistan's currency value was not so depressed due to inconsistent government policies, economic devaluation, and government instability. Hence, in the last four decades, the Pakistan currency deteriorated against US dollar, losing its worth more than eighteen times. Lately, in 2021, the US dollar got a record high exchange rate of 176 PKR in interbank rates. In 2010, there was a further fall in the value of the Pakistani currency to 86.05 PKR. It was 21.71 PKR on a dollar, while in 2000, it became equal to 53.65 PKR. Pakistan’s currency is losing its value gradually concerning dollar price as in 1990. Pakistan is a developing country facing a continuous decrease in dollar exchange rates. Exchange rate forecasting is essential for such countries in terms of economic empowerment and studying economic swings. The currency rate significantly impacts the economic operations of emerging countries. All preceding arguments are based on the concept that, with the development of a country and the advancement of government, the foreign exchange rate is dynamic and may be projected to obtain information about the country's economic situation. Furthermore, it is necessary for all aspects of international economic relations because it encompasses commerce and currency speculation. It is essential for every international business transaction and hence plays a crucial part in any developing country's economy. The phrase “exchange rate” describes the value of a currency unit concerning other currencies. It may be inferred based on the results of tentative models that the ARCH model outperforms the GARCH model in terms of predicting the USD/PKR exchange rate. Thus, the process turns to capture the volatility effect of conditional heteroscedasticity through GARCH modeling. These statistical metrics suggested the presence of conditional heteroscedasticity. Explanatory factors were used as indicators, and the prediction performance was assessed using a variety of commonly known statistical metrics. Lagged observations of the data series and moving average technical analysis are used in both models. The time series model Auto-Regressive Integrated Moving Average (ARIMA) and Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) are utilized to forecast the daily US dollar to Pakistan rupee currency exchange rates (USD/PKR). This study aims to build and compare the accuracy of various methods. Because of the unpredictability and volatility of currency rates, the exchange rate prediction has become one of the most challenging applications of financial time series forecasting. Exchange rates are crucial in regulating the foreign exchange market's dynamics.
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