Short-term and long-term price forecasting models for the future exchange of Malaysian natural rubber market

Abstract

Kuala Lumpur rubber market drifted uncertainly within a narrow range. Market situation provided upward pressure on prices and producer and consumer interest was poor coupled with weak prices in the regional markets. The objectives of the study are: (a) to estimate the relationship between natural rubber (NR) price and supply, demand, and stock, while some other factors of crude oil price and exchange rate by using simultaneous supply-demand and price system equation and Vector Error Correction Method (VECM); (b) to forecast the short-term and long-term NR price; and (c) to compare and evaluate the price forecasting models. Firstly, the data was analysed by Ferris and Engle-Granger's procedure; secondly, both price forecasting methodology were tested by Pindyck-Rubinfeld and Makridakis's procedure. The result shows that VECM model is more efficient using quarterly data; a short-term price forecast is decreasing and a long-term price forecast is predicted to increasing trend of the Malaysian rubber market.