Abstract
In this paper, I propose and estimate a model to determine the exchange rate for the Bangladeshi Taka (BDT) vis-à-vis. US Dollar (USD). I use monthly data for the period of January 1999 to August 2008. I employ the Johansen cointegration technique and I find that nominal exchange rate is cointegrated with several macroeconomic variables. As such, the model is consistent with standard international economic theory. In addition, I find that this model provides out-of-sample forecasts that are better than naïve random walk forecasting model. That is, the information that the cointegrated relationship provides, improves forecasting performance.
Article Details
- Year: 2012
- Volume: 33
- Issue: 3
- Pages: 81 - 96
- Accepted: 30.08.2012
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DOI:
https://doi.org/10.5281/zenodo.21078275 -
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How to Cite?
Syed Imran Ali Meerza (2012). Exchange Rate Determination of Bangladesh: A Cointegration Approach. Journal of Economic Cooperation and Development, 33(3), 81-96. https://doi.org/10.5281/zenodo.21078275
