Forecasting Currency in East Java: Classical Time Series vs. Machine Learning

Authors

  • J A Putri Department of Statistics, Institut Teknologi Sepuluh November, Indonesia
  • Suhartono Suhartono Department of Statistics, Institut Teknologi Sepuluh November, Indonesia
  • H Prabowo Department of Statistics, Institut Teknologi Sepuluh November, Indonesia
  • N A Salehah Department of Statistics, Institut Teknologi Sepuluh November, Indonesia
  • D D Prastyo Department of Statistics, Institut Teknologi Sepuluh November, Indonesia
  • Setiawan Department of Statistics, Institut Teknologi Sepuluh November, Indonesia

DOI:

https://doi.org/10.29244/ijsa.v5i2p284-303

Keywords:

arimax, arimax-dnn, deep neural network, currency, forecasting

Abstract

Most research about the inflow and outflow currency in Indonesia showed that these data contained both linear and nonlinear patterns with calendar variation effect. The goal of this research is to propose a hybrid model by combining ARIMAX and Deep Neural Network (DNN), known as hybrid ARIMAX-DNN, for improving the forecast accuracy in the currency prediction in East Java, Indonesia. ARIMAX is class of classical time series models that could accurately handle linear pattern and calendar variation effect. Whereas, DNN is known as a machine learning method that powerful to tackle a nonlinear pattern. Data about 32 denominations of inflow and outflow currency in East Java are used as case studies. The best model was selected based on the smallest value of RMSE and sMAPE at the testing dataset. The results showed that the hybrid ARIMAX-DNN model improved the forecast accuracy and outperformed the individual models, both ARIMAX and DNN, at 26 denominations of inflow and outflow currency. Hence, it can be concluded that hybrid classical time series and machine learning methods tend to yield more accurate forecasts than individual models, both classical time series and machine learning methods.

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References

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Published

2021-06-30

How to Cite

Putri, J. A. ., Suhartono, S., Prabowo, H., Salehah, N. A., Prastyo, D. D., & Setiawan, S. (2021). Forecasting Currency in East Java: Classical Time Series vs. Machine Learning. Indonesian Journal of Statistics and Its Applications, 5(2), 284–303. https://doi.org/10.29244/ijsa.v5i2p284-303

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