ANALYSING Inflation in Nigeria: A Fractionally Integrated ARFIMA-GARCH Modelling Approach

Paul Iorember, Terzungwe Usar and Kabiru Ibrahim ()

MPRA Paper from University Library of Munich, Germany

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: Inflation; AFIMA; GARCH; Fractional Integrated and Long Memory; ADF and KPSS (search for similar items in EconPapers)
JEL-codes: B26 (search for similar items in EconPapers)
Date: 2018-01-07
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ore
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Published in African Journal of Economic Review 1.6(2018): pp. 33-46

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Related works:
Journal Article: Analyzing inflation in Nigeria: a fractionally integrated ARFIMA-GARCH modelling Approach (2018)
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