The exchange rate is influenced by multiple national and international macroeconomic factors, which generates high levels of uncertainty. The objective of this research is the construction of ARIMA-GARCH and ARIMAX-GARCH models as a tool for the forecast of the exchange rate in Colombia from the daily returns of the closing prices USD/COP and its analysis of dynamic correlation with some of the most explicative variables. The results suggest that the incorporation of significant exogenous variables within the ARIMAX-GARCH model with persistent correlation according to the DCC (Dinamic Conditional Correlation) model to the USD/COP pair generates out-of-sample forecasts with better performance than the ARIMA-GARCH univariate models.
|Translated title of the contribution||Modeling and comovements of the Colombian exchange rate, 2011-2017|
|Number of pages||41|
|Journal||Revista de Metodos Cuantitativos para la Economia y la Empresa|
|State||Published - 1 Jan 2019|