Predicting inflation in Sri Lanka using ARMA models

NYONI, THABANI (2019): Predicting inflation in Sri Lanka using ARMA models.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Forecasting; Inflation; Sri Lanka
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E47 - Forecasting and Simulation: Models and Applications

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