Forecasting the United State Dollar(USD)/Bangladeshi Taka (BDT) exchange rate with deep learning models: Inclusion of macroeconomic factors influencing the currency exchange rates

Forecasting a currency exchange rate is one of the most challenging tasks nowadays. Due to government monetary policy and some uncertain factors, such as political stability, it becomes difficult to correctly forecast the currency exchange rate. Previously, many investigations have been done to forecast the exchange rate of the United State Dollar(USD)/Bangladeshi Taka(BDT) using statistical time series models, machine learning models, and neural network models. But none of the previous methods considered the underlying macroeconomic factors of the two countries, such as GDP, import/export, government revenue, etc., for forecasting the USD/BDT exchange rate. We have included various time-sensitive macroeconomic features directly impacting the USD/BDT exchange rate to address this issue. These features will create a new dimension for researchers to predict and forecast the USD/BDT exchange rate. We have used various types of models for predicting and forecasting the USD/BDT exchange rate and found that Among all our models, Time Distributed MLP provides the best performance with an RMSE of 0.1984. Finally, we have proposed a pipeline for forecasting the USD/BDT exchange rate, which reduced the RMSE of Time Distributed MLP to 0.1900 and has proven effective in reducing the error of all our models.