Abstract
An empirical Bayes (EB) model to estimate the exchange rate of a national currency is described. The national currency under consideration is typically non-convertible, and is generally associated with a weak economy of a Third World country. We take the Nigerian currency as an example. Using theta as a generic notation for the exchange rate parameter, a sequence of sample mean estimates theta i MN (i = 1, 2, …, m) is generated over m time periods. An EB model is formulated for the theta MN , from which the empirical Bayes estimates theta i EB are calculated. The performances of theta EB and the Central Bank of Nigeria (CBN) estimate theta CBN are compared. On several performance measures, theta EB is shown to be superior to theta CBN .
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
