Impact of Covid-19 on us dollar exchange rate in Sri Lanka: A time series analysis

Abstract

The exchange rate is considered a key financial variable that affects the decisions of exporters, importers, investors, bankers, tourists, and policymakers in developed and developing countries. Exchange rate fluctuations determine the international reserves, international investment portfolios, the competitiveness of exports and imports, and the costs incurred by tourists. Understanding the behaviour of exchange rates is important for developed and developing countries to formulate and modify economic policies. Therefore, this research studies the influence of COVID-19 on the USD sell exchange rate in Sri Lanka using a time series analysis. The study was conducted using daily exchange rates from 19 November 2019 to 18 October 2020, and it attempted to obtain the best ARIMA model: AR(1), AR(6), AR(14), AR(27), MA(3), MA(8), MA(11). Finally, the USD sell exchange rate has been forecasted from16 October 2019 to 31 January 2021