Forecasting Model Of Inflationary Process In Ethiopia

The primary focus of monetary policy both in Ethiopia and elsewhere, has traditionallyrnbeen the maintenance of a low and stable rate of aggregate price inflation as defined byrncommonly accepted measures such as the consumer price index. The control of inflationrnis one of the problems facing a government wishing to encourage rapid economicrndevelopment. The aim of this study is to investigate the nature of inflation in Ethiopia andrnconstruct a model that can be used to forecast future values. The exponential smoothingrnmethod was employed and the forecasting performance of winter (additive) method wasrnfound to be better. Two alternative approaches to model identification were considered,rnthe Box-Jenkins methodology and penalty jimction criteria. For Ethiopian monthlyrninflation data covering the period 1997:08 to 2006:06 various possible ARMA modelsrnwere fitted. The comparative performance of these ARMA models were checked andrnverified by using Akaike In/ormation Criteria, Schwartz Criteria, Root mean squarernpercentage error, Mean absolute error and Mean absolute percentage error.

Get Full Work

Report copyright infringement or plagiarism