Finally, the authors find out that their suggested hybrid neural network is able to produce more accurate forecasts than the standard models and can be helpful in eliminating the risk of making the bad decision in decision-making process. Profits or losses accrue as the exchange rate of that currency fluctuates on the open market.
It is also regarded as the value of one country’s currency in relation to another currency. For example, an interbank exchange rate of 119 Japanese yen (JPY, ? 119 will be exchanged for each US$1 or that US$1 will be exchanged for each ? In this case it is said that the price of a dollar in relation to yen is ?
119, or equivalently that the price of a yen in relation to dollars is $1/119.
It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country.
There are various ways to measure RER. Thus the real exchange rate is the exchange rate times the relative prices of a market basket of goods in the two countries.
To determine the forecasting efficiency, they perform a comparative statistical out-of-sample analysis of the tested model with autoregressive models and the standard neural network.