The Efficacy of SARIMA Models for Forecasting Inflation Rates in Developing Countries: The Case for Turkey

International Research Journal of Finance and Economics, Vol. 62, pp. 111-142, 2011

32 Pages Posted: 20 May 2011 Last revised: 26 Dec 2015

See all articles by Gökhan Saz

Gökhan Saz

University of Vienna - Institute of Business Administration

Date Written: April 1, 2011

Abstract

This paper analyzes the efficacy of SARIMA models in view of forecasting the inflation rates in the Turkish economy. We perform rigorous tests on the stationarity and show that seasonality in the Turkish inflation rate is both deterministic and stochastic in nature, with the latter form dominating the inflation process. Further, we provide the first study that tests for fractional integration in a Turkish inflation series from 2003 to 2009. The proposed SARIMA model is derived by a systematic modeling strategy with the step- wise selection procedure of the novel Hyndman-Khandakar (HK) algorithm. Our results suggest a single best SARIMA model that provides a parsimonious and accurate representation of the Turkish inflation process from 2003 to 2009.

Keywords: Autoregressive Moving Average, Nonstationarity, Structural Change, Time Series, Unit Root; Forecast, Forecasting; Consumer Price Index, CPI, Inflation

JEL Classification: C32, C53, E37, E31

Suggested Citation

Saz, Gökhan, The Efficacy of SARIMA Models for Forecasting Inflation Rates in Developing Countries: The Case for Turkey (April 1, 2011). International Research Journal of Finance and Economics, Vol. 62, pp. 111-142, 2011, Available at SSRN: https://ssrn.com/abstract=1845643

Gökhan Saz (Contact Author)

University of Vienna - Institute of Business Administration ( email )

Bruenner Strasse 72
Vienna, A1210
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
476
Abstract Views
1,855
rank
77,152
PlumX Metrics