MODELLING AND FORECASTING INFLATION RATES IN GHANA: AN APPLICATION OF SARIMA MODELS

• Main Author: AIDOO, ERIC
• Format: Others
• Language: English
• Published: Högskolan Dalarna, Statistik 2010
• Subjects: Ghana Inflation; Forecasting; Box-Jenkins Approach; SARIMA model; Unit Root test; ARCH–LM test; ADF test; HEGY test; Ljung-Box test
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:du-4828

Ghana faces a macroeconomic problem of inflation for a long period of time. The problem in somehow slows the economic growth in this country. As we all know, inflation is one of the major economic challenges facing most countries in the world especially those in African including Ghana. Therefore, forecasting inflation rates in Ghana becomes very important for its government to design economic strategies or effective monetary policies to combat any unexpected high inflation in this country. This paper studies seasonal autoregressive integrated moving average model to forecast inflation rates in Ghana. Using monthly inflation data from July 1991 to December 2009, we find that ARIMA (1,1,1)(0,0,1)12 can represent the data behavior of inflation rate in Ghana well. Based on the selected model, we forecast seven (7) months inflation rates of Ghana outside the sample period (i.e. from January 2010 to July 2010). The observed inflation rate from January to April which was published by Ghana Statistical Service Department fall within the 95% confidence interval obtained from the designed model. The forecasted results show a decreasing pattern and a turning point of Ghana inflation in the month of July.