ABSTRACT
In this chapter, a forecasting approach based on the international economic situation is proposed by integrating vine copula and SVNN for the first time. In this chapter, the major foreign currencies are selected, including the currencies of the Special Drawing Right (SDR) currency basket. By considering the particularity of China’s exchange market, the Hong Kong dollar is also taken into consideration. First, the AR-GJR-GARCH is utilized to filter the log yield. Secondly, the vine copula is used to study the dependencies between the RMB and the major foreign exchange assets, including the RMB against the US dollar, the RMB against the euro, the RMB against the 100 Japanese yen, the RMB against the Hong Kong dollar and the RMB against the British pound sterling, under China’s exchange rate reforms. Thirdly, three variables are selected to represent the international economic situation, for they have higher dependencies with RMB/USD. Fourthly, a vine copula–SVNN hybrid forecasting approach based on the international economic situation is proposed to forecast the central parity of the RMB against the USD.
