Page 66 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 2, 2014, pp. 66-80

MODELLING THE INFLATIONARY PROCESSES AND FORECASTING:

AN APPLICATION OF ARIMA, SARIMA MODELS

Murad Yusifov
candidate for PhD.
Baku State University
e-mail: [email protected]

Received 27 June 2014; accepted 15 December 2014; published online 25 December 2014

Abstract

The purpose of this research is to model the inflationary processes on the based of

autoregressive and moving average processes and determine the short-term inflation forecasting

model. Modelling the inflationary processes and forecasting estimation assume great importance

while developping the investment projects, indexation of wages, predetermining the macroeconomic

policy and preventive measures. The advanced forecasting models such as ARIMA and SARIMA

have been applied in this study.

Keywords: ARIMA, SARIMA, inflationary processes, forecasting.

JEL classification Codes: P24; P44; C53; E27

Introduction

Inflationary processes and forecasting the inflation originated from complex combination of

these ones assume a great importance both in micro and macro economic level. Short-term

inflation forecasting is the necessary component of monetary policy. There are several research

approaches such as ARIMA, SARIMA, periodogram analysis and Fourier series, ARCH,

GARCH, models to forecast the inflation volatility and rates. Of course, it is possible to happen

the non-economic shock factors to change the macro economic stability including price stability.

These shocks can not be predetermined in advance in the world. If the markets act on the

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