Trend Analysis On The Euro Exchange Under The Debt Crisis In Europe

In December2009, the three major rating agencies lowered the Greek sovereign debt rating, which was a prelude to the European sovereign debt crisis. Then the debt problem became out of control, especially with the emergence of "universal" remarks, the market began to question Spain, Portugal and even Italy in the Southern Europe. They found that Greek debt problem is not unique. Sovereign debt crisis evolved from an individual country to the whole European areas, even to the entire world eventually. The volatility of Euro exchange rate, as the key economic indicator of European market economy and international financial market, has caused wide attention from the global market. In this paper, we will focus on the impact of European debt crisis on the Euro-zone economy. In details, we will use artificial neural net work method to analyses the future of the Euro exchange rate and its volatility.This paper can be divided into five parts:Chapter one reviews the recent studies on the European exchange rate in the debt crisis both at home and abroad. It points out that uncertainty remains since the debt crisis is not completely over. In addition, there are few relevant studies on Euro exchange rate in the debt crisis.Chapter two introduces the emergence of European debt crisis and its evolution. Then we analyze the trend of the Euro and the uncertainties which Euro-area faces in recent years.Chapter three is an introduction of artificial neural network model. We make an empirical analysis by using the data of the Euro exchange rate and the overall monthly economic variables from2002to2007. The empirical analysis involves co-integration analysis between exchange rate and inflation rate, short-term interest rate, empirical analysis of ARMA model, neural network model, combination forecast model and the minimum variance portfolio forecast model analysis. Finally, we use relative error method to test the model’s forecast performance.Chapter four uses artificial neural network model to do empirical analyze on Euro against dollar and Euro against yuan. In consideration of the impact of the debt crisis on the exchange rate, we will do some adjustments in the neural network model.In details, we add debt-GDP ratio as a variable and select data during the debt crisis from2007to2010. We propose some suggestions finally.Chapter five is the conclusion of Euro analysis. We suggest that the trend of Euro in the following years is still unstable. European sovereign debt crisis, world economic recovery and the differentiation of national macro-policy orientation are the main factors that affect exchange rates between national currencies. Moreover, in the case of abundant global liquidity, international speculative capital movements on the exchange rate also play a certain role. In2011, with the slowing recovery process of the global economy, the uncertainties in the recovery process will be further increased and the main exchange rates will also become more complicated.