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Predicting inflation in Sri Lanka using ARMA models

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  • NYONI, THABANI

Abstract

This research uses annual time series data on inflation rates in Sri Lanka from 1960 to 2017, to model and forecast inflation using ARMA models. Diagnostic tests indicate that S is I(0). The study presents the ARMA model (1, 0, 0) [or simply AR (1) process] for forecasting inflation rates in Sri Lanka. The diagnostic tests further imply that the presented optimal ARMA (1, 0, 0) model is not only stable but also suitable. The results of the study apparently show that S will be approximately 8.17% by 2020. Policy makers and the business community in Sri Lanka are expected to take advantage of the anticipated stable inflation rates over the next decade.

Suggested Citation

  • Nyoni, Thabani, 2019. "Predicting inflation in Sri Lanka using ARMA models," MPRA Paper 92432, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:92432
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    References listed on IDEAS

    as
    1. Christian Buelens, 2012. "Inflation forecasting and the crisis: assessing the impact on the performance of different forecasting models and methods," European Economy - Economic Papers 2008 - 2015 451, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Mohamed Fenira, 2014. "Democracy: A Determinant Factor in Reducing Inflation," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 363-375.
    3. Nyoni, Thabani, 2018. "Modeling and Forecasting Inflation in Zimbabwe: a Generalized Autoregressive Conditionally Heteroskedastic (GARCH) approach," MPRA Paper 88132, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Forecasting; Inflation; Sri Lanka;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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