Analysis of Exchange Rates as Time-Inhomogeneous Markov Chain with Finite States

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dc.contributor.authorMettle, F.O.
dc.contributor.authorBoateng, L.P.
dc.contributor.authorQuaye, E.N.B.
dc.contributor.authorAidoo, E.K.
dc.contributor.authorSeidu, I.
dc.date.accessioned2022-05-06T10:32:03Z
dc.date.available2022-05-06T10:32:03Z
dc.date.issued2022
dc.descriptionResearch Articleen_US
dc.description.abstractIrrespective of whether the test for homogeneity is significant or not, most researchers assume time-homogeneity in analysing Markov chains due to scanty literature on the analysis of time-inhomogeneous Markov chains. Based on the assumption that, for each point in time in the future, a stochastic process will be subjected to a randomly selected transition matrix from an ergodic set of transition matrices the process was subjected to in the recent past, a methodology was proposed for analysing the long-run behaviours of time-inhomogeneous Markov chains. The proposed model was implemented to historical data consisting of the exchange rate of cedi-dollar, cedi-pound, and cedi-euro spanning over 6 years (January 2012 to December 2017). The results show that under certain “closeness” conditions, the long-run behaviours of the time-inhomogeneous case are almost identical to those of the time-homogeneous case. The paper asserted that even if the Markov chain exhibit time-inhomogeneity, analysing the Markov chain under the assumption of time-homogeneity is a step in the right direction under certain “closeness” conditions; otherwise, the proposed method is recommended. It was also found that investing in dollars yields better returns than the other currencies in Ghana.en_US
dc.identifier.otherhttps://doi.org/10.1155/2022/3524808
dc.identifier.urihttp://ugspace.ug.edu.gh/handle/123456789/38029
dc.language.isoenen_US
dc.publisherJournal of Applied Mathematicsen_US
dc.subjectExchange Ratesen_US
dc.subjectTime-Inhomogeneousen_US
dc.subjectMarkov Chainen_US
dc.titleAnalysis of Exchange Rates as Time-Inhomogeneous Markov Chain with Finite Statesen_US
dc.typeArticleen_US

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