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Short-Term Forecasting of Inflation in Bangladesh with Seasonal ARIMA Processes

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  • Akhter, Tahsina

Abstract

The purpose of this study is to forecast the short-term inflation rate of Bangladesh using the monthly Consumer Price Index (CPI) from January 2000 to December 2012. To do so, the study employed the Seasonal Auto-regressive Integrated Moving Average (SARIMA) models proposed by Box, Jenkins, and Reinsel (1994). CUSUM, Quandt likelihood ratio (QLR) and Chow test have been utilized to identify the structural breaks over the sample periods and all three tests suggested that the structural breaks in CPI series of Bangladesh are in the month of February 2007 and September 2009. Hence, the study truncated the series and using CPI data from September 2009 to December 2012, the ARIMA(1,1,1)(1,0,1)12 models were estimated and forecasted. The forecasted result suggests an increasing pattern and high rates of inflation over the forecasted period 2013. Therefore, the study recommends that Bangladesh Bank should come forward with more appropriate economic and monetary policies in order to combat such increase inflation in 2013.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43729.

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Date of creation: 10 Jan 2013
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Handle: RePEc:pra:mprapa:43729

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Keywords: Inflation; Forecasting; SARIMA; Bangladesh;

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  1. Peter Schulze & Alexander Prinz, 2009. "Forecasting container transshipment in Germany," Applied Economics, Taylor & Francis Journals, vol. 41(22), pages 2809-2815.
  2. Meyler, Aidan & Kenny, Geoff & Quinn, Terry, 1998. "Forecasting irish inflation using ARIMA models," MPRA Paper 11359, University Library of Munich, Germany.
  3. Junttila, Juha, 2001. "Structural breaks, ARIMA model and Finnish inflation forecasts," International Journal of Forecasting, Elsevier, vol. 17(2), pages 203-230.
  4. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
  5. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
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