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

Author

Listed:
  • Iorember, Paul
  • Usar, Terzungwe
  • Ibrahim, Kabiru

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.

Suggested Citation

  • Iorember, Paul & Usar, Terzungwe & Ibrahim, Kabiru, 2018. "ANALYSING Inflation in Nigeria: A Fractionally Integrated ARFIMA-GARCH Modelling Approach," MPRA Paper 85655, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:85655
    as

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    File URL: https://mpra.ub.uni-muenchen.de/85655/1/MPRA_paper_85655.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation; AFIMA; GARCH; Fractional Integrated and Long Memory; ADF and KPSS;

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics

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