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Question 2. As the world's economies become increasingly interdependent, various exchange rates between currencies have become important in making business decisions. For many U.S. businesses,
Question 2. As the world's economies become increasingly interdependent, various exchange rates between currencies have become important in making business decisions. For many U.S. businesses, the European Union exchange rate (in euro per U.S. dollar) is an important decision variable. Download the spreadsheet with the data on this exchange rate (EXEUR) by month for a two-year period.
Period | EXEUR | Period | EXUR | ||
2016 | M1 | 0.921234 | 2017 | M1 | 0.940291 |
M2 | 0.901551 | M2 | 0.938967 | ||
M3 | 0.89815 | M3 | 0.935366 | ||
M4 | 0.881368 | M4 | 0.933358 | ||
M5 | 0.884017 | M5 | 0.904977 | ||
M6 | 0.890313 | M6 | 0.890234 | ||
M7 | 0.904568 | M7 | 0.867303 | ||
M8 | 0.892299 | M8 | 0.846525 | ||
M9 | 0.891424 | M9 | 0.839419 | ||
M10 | 0.907935 | M10 | 0.850702 | ||
M11 | 0.926612 | M11 | 0.851571 | ||
M12 | 0.948317 | M12 | 0.84488 | ||
The exchange rate between Euro and Dollar for a two-year period | |||||
The data is retreieved from St Louis FRED | |||||
https://fred.stlouisfed.org/series/EXJPUS |
- Prepare a time series plot of this data series.
- Use the naive forecasting model to forecast EXEUR for each month from year 1 M2 through year 3 M1.
- Plot actual and forecast values of the series for the year 1 M1 through year 3 M1. (You will not have an actual value for year 3 M1 or a forecast value for year 1 M1)
- Calculate RMSE for the period from year 1 M2 through year 2 M12.
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