Time Series Analysis of Real Effective Exchange Rate

Abstract

This paper analyses the trendand seasonal variation of real effective exchange rate (REER) with an objectiveof building a model for predicting the  exchangerate. Classical decomposition  of the timeseries data of monthly  export and trade basedREER from January 2011 to August 2015 has been performed. The trend and seasonalcomponents have been studied. The results show that the trend and seasonal effectare  attributed only to chance (random) andnot by a systematic factor like a trend or a seasonal change.Keywords: Exchangerate, Trend Analysis, Seasonal variation, Classical Decomposition.