Abstract:
As China play an increasingly important role in global trading, its economy raises serious
attention all over the world. Accordingly, China's official currency, the yuan, an essential
indicator of its economy health, has become one of the most valued currencies in the world.
Therefore, it is useful to forecast the future value of the yuan. For this purpose, this paper
proposes a model that can accurately forecast the exchange rate between the yuan and the dollar.
As is known, the yuan-to-dollar exchange rate was as low as 6.08 in 2014. However, this spiked
sharply to reach 6.9 in only two years. By analyzing related factors such as the consumer price
index (CPI), market expectations, and interest rates, this paper proposes a model that predicts the
yuan-to-dollar exchange rate to increase even more in the future, despite the consistent and
dramatic escalation of the rate in the last two years. This result is reasonable in that the U.S.
economy has mostly recovered from the 2008 market crash and stayed strong and robust,
whereas the Chinese government has preferred the devaluation of the yuan to make its exports
more competitive in the global market. The model suggests that investors should purchase more
U.S. dollars (relative to the yuan). |
International Journal of Social Science & Economic Research
