Exchange Rate Forecasting in Bangladesh: ARIMA and VAR Models

Abstract

Exchange rates play a crucial role in the economic structure of any country since they affect investment, foreign trade, and the stability of the economy as a whole. This research article explores the intricate dynamics of exchange rate development in Bangladesh, a country with a rapidly growing economy and a significant presence in the global trade landscape. The article delves into the historical evolution of exchange rates in Bangladesh, the factors influencing exchange rate movements, and the implications for the country's macroeconomic stability and international trade. The study employs various methodologies, including time-series analysis and econometric modeling to provide a comprehensive analysis of exchange rate development and near-term exchange rate forecast in Bangladesh. The findings indicate that exchange rate policies and external economic factors play a pivotal role in shaping Bangladesh's exchange rate regime, affecting the country's economic performance and trade competitiveness. The study also focuses on the future challenges for exchange rates in Bangladesh which are interconnected with the country's economic development and global economic dynamics.