Forecasting Currency in Circulation in Malaysia  Using ARCH and GARCH Models

Nur Azreen Abdul Razak; Azme Khamis; Mohd Asrul Affendi Abdullah; Suliadi Firdaus Sufahani

doi:10.9734/CJAST/2018/40358

Research Article Open access CC BY 4.0

Forecasting Currency in Circulation in Malaysia Using ARCH and GARCH Models

Nur Azreen Abdul Razak, Azme Khamis, Mohd Asrul Affendi Abdullah, Suliadi Firdaus Sufahani

Current Journal of Applied Science and Technology · pp. 1–5 · Published 24 Apr 2018

10.9734/CJAST/2018/40358

Abstract

The monthly economic time series commonly contains the volatility periods and it is suitable to apply the Heteroscedastic model to it where the conditional variance is not constant throughout the time trend. The aim of this study is to model and forecast the currency in circulation (CIC) in Malaysia over the time period, from January 1998 to January 2016. Two methods are considered, which are Autoregressive Conditional Heteroscedastic (ARCH) and Generalized Autoregressive Conditional Heteroskedasticity (GARCH). Using the Root Mean Square Error (RMSE) as the forecasting performance measure, this study concludes that GARCH is a more appropriate model compared to ARCH.

Forecasting time series analysis ARCH; GARCH currency in circulation

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Nur Azreen Abdul Razak, Azme Khamis, Mohd Asrul Affendi Abdullah, Suliadi Firdaus Sufahani (2018). Forecasting Currency in Circulation in Malaysia Using ARCH and GARCH Models. Current Journal of Applied Science and Technology , 1–5. https://doi.org/10.9734/CJAST/2018/40358

Affiliations

Nur Azreen Abdul Razak — Faculty of Applied Science and Technology, University Tun Hussein Onn Malaysia, 86400 Parit Raja, Batu Pahat, Johor, Malaysia.
Azme Khamis — Faculty of Applied Science and Technology, University Tun Hussein Onn Malaysia, 86400 Parit Raja, Batu Pahat, Johor, Malaysia
Mohd Asrul Affendi Abdullah — Faculty of Applied Science and Technology, University Tun Hussein Onn Malaysia, 86400 Parit Raja, Batu Pahat, Johor, Malaysia
Suliadi Firdaus Sufahani — Faculty of Applied Science and Technology, University Tun Hussein Onn Malaysia, 86400 Parit Raja, Batu Pahat, Johor, Malaysia

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