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Article Information:
Modelling Rates of Inflation in Ghana: An Application of Arch Models
Ezekiel N.N. Nortey, Benedict Mbeah-Baiden, Julius B. Dasah and Felix O. Mettle
Corresponding Author: Benedict Mbeah-Baiden
Submitted: February 28, 2014
Accepted: April 08, 2014
Published: June 20, 2014 |
Abstract:
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This study sought to model rates of inflation in Ghana using the Autoregressive Conditional Heteroscedastic models. In particular, the ARCH, GARCH and EGARCH models were compared. Monthly rates of inflation from January 2000 to December 2013 were used in the study with the rates from January 2000 to December 2012 serving as the training set and January 2013-December 2013 serving as the validation set. The result revealed that the EGARCH (1, 2) model with a mean equation of ARIMA (3, 1, 2) × (0, 0, 0)12 was appropriate for modelling Ghana’s monthly rates of inflation. A one year out-of-sample forecast for the year 2014 shows that Ghana would experience double digit inflation with an end of year inflation rate of 15.0% and a margin of error of 0.9%. This study would inform and guide policy-makers as well as investors and businessmen on management of expected future rates of inflation.
Key words: ARCH models, ARIMA models, Ghana, inflation, performance, ,
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Cite this Reference:
Ezekiel N.N. Nortey, Benedict Mbeah-Baiden, Julius B. Dasah and Felix O. Mettle, . Modelling Rates of Inflation in Ghana: An Application of Arch Models. Current Research Journal of Economic Theory, (2): 16-21.
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ISSN (Online): 2042-485X
ISSN (Print): 2042-4841 |
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