Neural Network Model For The RMB/USD Exchange Rate Forecast And The Risk Elusion

Recently, with the rapid development of our economy, year-on-year expansion of favorable balance and the increase of export, RMB is undergoing the unprecedented pressure of appreciation. In 2005, July the 21st, The People's bank of China carried out the reform of the RMB exchange rate which appreciated 2% immediately. And the daily change range has enlarged to 3%. From then to now, RMB has shown the appreciation trend all the time, from 8.11 to 7.73. The issue of RMB exchange rate has become the focus of the world's attention, it has affected the whole world on all aspects, such as politics, finance, trade, life and so on. At the same time, the float of the RMB exchange rate has increased the risk to the domestic enterprises which deal with the international business. So how to forecast the RMB exchange rate in the scientific way and how to adopt the proper steps to avoid the floating risk, have become one of the most important problems in the world.In this paper, we use the Neural Network method as the mainly instrument to establish the forecast model on the RMB exchange rate, which is basing on the Purchasing Power Par Value theory and according to the non-linear relations in the exchange rate and micro economical variables. From the comparison of the Neural Network and the Radom Walking Model to show the advantage of the first one. In the end, according to the RMB exchange rate principle, discuss some important methods on keeping away from the floating risk.The structure of this text: In the first chapter we mainly introduce some important determinate theories on the exchange rate; In the second chapter we generalize the important contacts and methods on the exchange rate forecast; In the third chapter we expatiate the mainly theories of the Neural Network Model, feasibility and the shortage; In the forth chapter we establish the Neural Network Model on the RMB exchange rate (monthly data from 2002 to 2006), which bases on the Purchasing Power Par Value theory, to forecast the short-term exchange rate and compare with the Random Walking Model; In the fifth chapter, we mainly discuss some important steps on the elusion of the RMB exchange rate.