Modelling the BRICS Exchange Rates Using the Vector Autoregressive (VAR) Model

  • Lebotsa Daniel Metsileng North West University, Corner Dr Albert Lithuli, Mmabatho
  • Ntebogang Dinah Moroke North West University, Corner Dr Albert Lithuli, Mmabatho
  • Johannes Tshepiso Tsoku North West University, Corner Dr Albert Lithuli, Mmabatho
DOI: https://doi.org/10.22610/jebs.v10i5(J).2511
Keywords: VAR model, BRICS Exchange rates, Volatility, linear dependency and forecasting

Abstract

The paper modelled the BRICS exchange rates using the Vector Autoregressive (VAR) model. Monthly time series data ranging from January 2008 to January 2018 was used. All the analysis was computed using the R programming software. The study aimed to determine a suitable VAR model in modelling the BRICS exchange rates and determine the linear dependency between the financial markets (in particular BRICS exchange rates). Optimal lag length of one (1) was selected using the SIC. The VAR model with lag length one was fitted and the parameters were estimated. The results revealed that there is a unidirectional relationship amongst the BRICS exchange rates. The VAR (1) model did not satisfy all the diagnostic tests, therefore forecasting future values of the BRICS exchange rates could not be computed. Recommendations for different approaches were formulated.

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Published
2018-11-03
How to Cite
Metsileng, L. D., Moroke, N. D., & Tsoku, J. T. (2018). Modelling the BRICS Exchange Rates Using the Vector Autoregressive (VAR) Model. Journal of Economics and Behavioral Studies, 10(5(J), 220-229. https://doi.org/10.22610/jebs.v10i5(J).2511
Issue
Vol 10 No 5(J) (2018)
Section
Research Paper

Copyright (c) 2018 Lebotsa Daniel Metsileng, Ntebogang Dinah Moroke, Johannes Tshepiso Tsoku

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