Abstract

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.

Keywords:

ARCH models, ARIMA models, Ghana, inflation, performance,

References

Competing interests

The authors have no competing interests.

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Copyright

The authors have no competing interests.