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Arima Intervention Analysis of Monthly Xaf-Ngn Exchange Rates Occasioned By Nigerian Economic Recession

Ette Harrison Etuk and Alapuye Gbolu Eleki
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Ette Harrison Etuk: Department of Mathematics, Rivers State University, Port Harcourt, Nigeria
Alapuye Gbolu Eleki: Department of Mathematics/Statistics, Port Harcourt Polytechnic, Nigeria

Noble International Journal of Economics and Financial Research, 2017, vol. 2, issue 4, 76-81

Abstract: Time-plot of monthly Central African Franc (CFAFr or XAF) and Nigerian Naira (NGN) exchange rates from January 2004 to January 2017 shows a slight positive trend up to May 2016 after which there is an abrupt astronomical rise which calls for intervention. The intervention point is therefore June 2016 around which time the Nigerian economy sank into recession. Â At 1% level of significance the pre-intervention rates are non-stationary and differencing the series once renders it stationary. Â This pre-intervention series has the autocorrelation structure of white noise. This white noise model structure is confirmed by a non-significant ARIMA (6,1,6) fit. Â Post-intervention forecasts are obtained on the basis of the pre-intervention white noise model. Â The difference between post-intervention forecasts and actual observations is modelled to obtain the intervention model. The intervention model is statistically significant and may be useful as basis for intervention in the circumstance.

Keywords: CFAFr; NGN; Exchange Rates; Intervention Analysis (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:nap:nijefr:2017:p:76-81