Title: Complexity of exchange rate movement, analysis and volatility forecasting models: a review

Authors: Alexander Amo Baffour; Kofi Nyarko Gyimah; Alexander Owiredu

Addresses: Faculty of Business Administration, Department of Accounting and Finance, Pentecost University, GC-003-9632, Sowutuom, Accra, Ghana ' Faculty of Business Administration, Department of Accounting and Finance, Pentecost University, GC-003-9632, Sowutuom, Accra, Ghana ' Faculty of Business Administration, Department of Accounting and Finance, Pentecost University, GC-003-9632, Sowutuom, Accra, Ghana

Abstract: For obvious development in literature, various researchers and experts have relied on their area of expertise in the field of financial econometric to prove a substantive performance of one model or the other for volatility forecasting and analysis. Subsequently, no single model seems to be adequately suitable for the analysis of exchange rate movement and volatility. However, this paper is opposed to the random walk beliefs model as compared to the core findings by other empirical studies reviewed. We conclude that every currency has the strength which is determined by economic fundamentals such as, but not limited to, inflation, interest rate, balance of payment, national reserves, and which affect the volatility of exchange rates with respect to time. The study provides a very insightful summary of the development in finance concerning the complexity of exchange rate movement and volatility analysis models and together suggest a potential path for prospective researchers.

Keywords: exchange rate modelling; market efficiency and purchasing power parity; stochastic and ANN models; fundamental theory; technical models; hybrid models; monetary theory; asset theory.

DOI: 10.1504/IJMEF.2021.118279

International Journal of Monetary Economics and Finance, 2021 Vol.14 No.5, pp.460 - 476

Received: 26 Jun 2020
Accepted: 01 Apr 2021

Published online: 18 Oct 2021 *

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