Abstract
In this paper, the GARCH-MIDAS model is used to empirically study the influence of several uncertainties on the volatility of the CNY-USD forex market. The sample and out-of-sample prediction results show that the nine uncertainty indexes significantly impact the volatility of the CNY-USD forex market and can improve the prediction effect of CNY-USD rate volatility. Then using model confidence set and Direction-of-change test out-of-sample test, it is found that Compared with China's Economic policy uncertainty and China's trade policy uncertainty, US Economic Policy Uncertainty and US trade policy uncertainty can improve the prediction accuracy of CNY-USD forex market volatility.
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