Forecasting Foreign Exchange Rate by using ARIMA Model: A Case of VND/USD Exchange Rate

Abstract

Forecasting foreign exchange rate is one work that supports to foreign exchange rate risk of commercial joint stock banks in Vietnam. By using real foreign exchange rate data from the first day of 2013 to the last day of 2015, this paper introduces Arima model with four steps to forecast foreign exchange rate between VND/USD in the next twelve months of 2016. After having forecasted foreign exchange data, we compare them with real foreign exchange rate data to check the suitable level of Arima model for forecasting foreign exchange rate in Vietnam and the results show that Arima model is suitable for estimating foreign exchange rate in Vietnam in short-time period.

Keywords: Arima, Exchange Rate, Exchange Rate Forecasting, Stationary.