Analyzing inflation in Nigeria: a fractionally integrated ARFIMA-GARCH modelling Approach

Paul Iorember, Terzungwe Usar and Kabiru Ibrahim ()

African Journal of Economic Review, 2018, vol. 06, issue 01

Abstract: The study looked into the stochastic properties of CPI-inflation rate for Nigeria from 1995Q1 to 2016Q4. The study employed an autoregressive fractionally integrated moving average and a general autoregressive conditional heteroskedasticity (ARFIMA-GARCH) methodology as well as ADF/KPSS to investigate the long-memory properties of CPI-Inflation for Nigeria. The study found that CPI-inflation in Nigeria is shock dissipating at a geometric rate (fast mean reverting ability). The ARFIMA-GARCH process showed that CPI inflation in Nigeria is a heteroskedastic fractionally integrated process with quick mean reverting ability. The study therefore concludes that shocks to CPI-inflation in Nigeria such as sudden hikes in prices of energy products will not cause a permanent change in general price level but will eventually return to its mean state, and therefore having an implication for the Inflation-Unemployment tradeoff of the Philips curve.

Keywords: Financial; Economics (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Working Paper: ANALYSING Inflation in Nigeria: A Fractionally Integrated ARFIMA-GARCH Modelling Approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:afjecr:274742

DOI: 10.22004/ag.econ.274742

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