VAR Model and forecasting of Exchange Rate of Bangladesh

Background: Volatility clustering exchange rate of Bangladesh is market driven based on managed float. Besides vector auto regression (VAR) approach is used to determine the exchange rate in order to form rational expectation regarding exchange rate of Bangladesh.

Methods: Technical analyses ranging from unit ischolar_main to VAR have been used to forecast the monthly average exchange rate following new convention.

Results: It will help to determine the exchange rate stochastically.

Application: SWAP and forward exchange rate will be determined taking into account absolute and comparative advantage and rational expectation.