Presenting an Optimal Model for Keeping the Foreign Exchange Reserves of the Country in the Central Bank by Using Fuzzy Logic

Document Type : Original Article

Authors

1 Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University

2 Shahid Behehshti University, M.A. in Economics

Abstract

Entry of Euro into the International Monetary System as a serious rival for US Dollar and the steady depreciation of the value of US Dollar relative to Euro and other foreign currencies in the past few years have caused a lot of damage for those countries which have largely kept their reserves in terms of US Dollar. Therefore, forecasting the direction of foreign exchange rates are towards which the fluctuations inclined and also the determination of an optimal basket of foreign exchange are important for these countries.
In this article, using the fuzzy Autoregressive Moving Average (AREMA), the exchange rate of Rial against five main foreign currencies, namely, US Dollar, Euro, Japanese Yen, English Pound and Swiss Franc is Compared. As a result by applying the Variance-Average Approach, first by using 1381-1385 monthly data and then by applying the reset forecasting for the year 1386, the optimum combination of holding foreign reserves of the country's Central Bank has been estimated.
The results of the research show that first the error of Fuzzy AREMA Approach of forecasting is less the than the error of AREMA Approach. Second, based on the Variance-Average Approach, the share of US Dollar in the combination of foreign exchange reserves is decreasing and the shares of Euro and English Pound are increasing 

Keywords

References

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Journal of Economics and Modelling
Volume 1, Issue 3 - Serial Number 3
December 2010
Pages 39-66

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