Prediction by using Artificial Neural Networks and Box-Jenkins methodologies: Comparison Study

Abstract

The variations in exchange rate, especially the sudden unexpected increases and decreases, have significant impact on the national economy of any country. Iraq is no exception; therefore, the accurate forecasting of exchange rate of Iraqi dinar to US dollar plays an important role in the planning and decision-making processes as well as the maintenance of a stable economy in Iraq. This research aims to compare Box-Jenkins methodology to neural networks in terms of forecasting the exchange rate of Iraqi dinar to US dollar based on data provided by the Iraqi Central Bank for the period  30/01/2004 and 30/12/2014.

Based on the Mean Square Error (MSE), the Mean Absolute Error (MAE), and the Mean Absolute Percentage Error (MAPE) as criteria to compare the two methodologies, it was concluded that Box-Jenkins is better than neural network approach in forecasting.