Optimizing Currency Circulation Forecasts in Indonesia: A Hybrid Prophet- Long Short Term Memory Model with Hyperparameter Tuning
DOI:
https://doi.org/10.30812/matrik.v24i1.4052Keywords:
Currency Circulation, Forecasting, Hybrid Model, Long Short Term Memory, ProphetAbstract
The core problem for decision-makers lies in selecting an effective forecasting method, particularly when faced with the challenges of nonlinearity and nonstationarity in time series data. To address this, hybrid models are increasingly employed to enhance forecasting accuracy. In Indonesia and other Muslim countries, monthly economic and business time series data often include trends, seasonality, and calendar variations. This study compares the performance of the hybrid Prophet-Long Short-Term Memory (LSTM) model with their individual counterparts to forecast such patterned time series. The aim is to identify the best model through a hybrid approach for forecasting time series data exhibiting
trend, seasonality, and calendar variations, using the real-life case of currency circulation in South Sulawesi. The goodness of the models is evaluated using the smallest Mean Absolute Percentage Error (MAPE) and Root Mean Square Error (RMSE) values. The results indicate that the hybrid Prophet- LSTM model demonstrates superior accuracy, especially for predicting currency outflow, with lower MAPE and RMSE values than standalone models. The LSTM model shows excellent performance for currency inflow, while the Prophet model lags in inflow and outflow accuracy. This insight is valuable for Bank Indonesia’s strategic planning, aiding in better cash flow prediction and currency stock management.
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