INTERRUPTED TIME SERIES ANALYSIS OF SOUTH AFRICA RAND (ZAR)/ NIGERIA NAIRA (NGA) EXCHANGE RATE
Keywords:
Exchange rate, Arima intervention model, ForecastingAbstract
The plot of the daily South-Africa rand (ZAR)/ Nigeria naira (NGN) exchange rate showed a downward trend and later upward. An intervention point was noticed from 17th Dec, 2017. The pre-intervention series is found to be non-stationary, and became stationary after the first difference. The Augmented Dickey-Fuller (ADF) test statistics result of -7.279482 is less than the critical values of -3.548208,-2.912631 and -2.594027, the p-value (0.0000) is less than 0.05 which implies stationarity. The ACF and PACF of the differenced series is found to be stationary, hence ARIMA (0, 1, 0) is fitted which is a simple random walk. Forecast was made on the basis of the stationarity of the differenced series and a comparison of the intervention forecast and post-intervention rates revealed strong agreement between both series, hence the overall intervention model Xt=εt1−B+3.675318191−0.947528t−60It is found to be adequate. This is clearly seen from the R-squared and adjusted R-squared which is approximately 77%.References
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