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Daily Uganda Shilling/United States Dollar Exchange Rates Modeling by Box-Jenkins Techniques

Author

Listed:
  • Ette Etuk
  • Bazinzi Natamba

Abstract

A 180-point daily exchange rate series of the Uganda shilling (UGX) and the United States dollar (USD) covering from 25 August 2014 to 20 February 2015 is analyzed by seasonal Box-Jenkins methods. A time-plot of the series shows an upward trend indicating a relative depreciation of the UGX. A seven-day differencing of the series yield a series that is adjudged stationary by the Augmented Dickey Fuller (ADF) Test. However, its correlogram contradicts a stationarity hypothesis. A non-seasonal differencing of this series produces a series adjudged as stationary and having an autocorrelation function that suggests two models, namely: a SARIMA(0,1,1)x(0,1,1)7 and a SARIMA(0,1,1)x(1,1,1)7. Diagnostic checking methods used to compare the two models reveal that the former model is the more adequate model. Hence it is proposed that the exchange rates follow a SARIMA(0,1,1)x(0,1,1)7 model. Forecasting might therefore be based on this model.

Suggested Citation

Handle: RePEc:air:journl:v:2:y:2015:i:4:p:425
DOI: 10.5281/zenodo.17277902
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