Univariate Time Series Modelling of Cedi-Dollar  Nominal Exchange Rate

John Tumaku; Solomon Yemidi; Francois Mahama

doi:10.9734/AJEBA/2016/28867

Research Article Open access CC BY 4.0

Univariate Time Series Modelling of Cedi-Dollar Nominal Exchange Rate

John Tumaku, Solomon Yemidi, Francois Mahama

Asian Journal of Economics, Business and Accounting · pp. 1–12 · Published 14 Nov 2016

10.9734/AJEBA/2016/28867

Abstract

This paper seeks to develop a statistical model capable of forecasting the Ghanaian Cedi US Dollar nominal exchange rate. The study uses end-of-month interbank exchange rate between January, 1994 and May, 2016. We employed the Autoregressive Integrated Moving Average (ARIMA) scheme in analysing the data. The study reveals that the exchange rate has a unit root implying that shocks to the exchange rate have a long term permanent effect. We have established that the end-of-month Cedi-Dollar rate follows ARIMA (0,1,2) process. The 12-month ahead forecast indicates that the value of the Cedi to the Dollar would decline in line with its past trend. The forecasts from the model compared favourably with actual realizations of the exchange rate. It is recommended that businesses whose cost is in Cedi but their revenue in Dollar should use the lower limit of the forecasts for the purposes of planning their business activities and vice versa.

Cedi Dollar nominal exchange rate ARIMA process unit root

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John Tumaku, Solomon Yemidi, Francois Mahama (2016). Univariate Time Series Modelling of Cedi-Dollar Nominal Exchange Rate. Asian Journal of Economics, Business and Accounting , 1–12. https://doi.org/10.9734/AJEBA/2016/28867

Affiliations

John Tumaku — Department of Mathematics and Statistics, Ho Polytechnic, P.O.Box HP 217, Ho, Ghana
Solomon Yemidi — Department of Multidisciplinary Studies, Ho Polytechnic, P.O.Box HP 217, Ho, Ghana
Francois Mahama — Department of Mathematics and Statistics, Ho Polytechnic, P.O.Box HP 217, Ho, Ghana

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