Forecasting Through Smoothing Methods: Rupee-Dollar Exchange Rate

Abstract

The note discusses various smoothing methods of forecasting, including single and double moving averaging methods, single and double exponential smoothing methods plus Holt's and Winter's methods. Further, it illustrates the application of each of these methods through monthly time series data on the rupee-dollar exchange rate for the period January 1980 through July 1992. In addition, for evaluating the comparative performance of various forecasting methods, the note provides computations for important measures of forecast accuracy, viz. MAPE and Theil U2, as well as forecasts through the Naive method.The note should be useful for understanding the various smoothing methods of forecasting and for evaluating the comparative performance of various methods.