Журнал бизнеса и финансов

Daily Exchange Rate EURO/USD: ARDL Methodology to Co-Integration

Abstract

Mahmoud Mourad

The study research showed the importance of the ARDL model with co-integration in the monitoring of the relationship between the highest daily value of the exchange rate (HIGH) for the EURO against the US dollar (EURO to USD) and the opening price (OPEN) in the short and long terms. The error correction model (ECM) showed high efficiency in forecasts (ex-post forecasts) over a very long run covering three hundred and seventythree days, as indicated by the mean absolute percentage error. Finally, the ECM model revealed an important speed of adjustment in modifying the deviation and returning to equilibrium after a certain shock in the relevant time series, so that approximately 15.35% of the deviation from the target, between the two variables (HIGH) and (OPEN), would be corrected within one day. Finally, our results also revealed that the Chow predictive and cumulative sum (CUSUM) tests roughly supported the parameters stability of the estimated Restricted Error Correction (REC) Model.