Modeling and forecasting inflation in The Gambia: an ARMA approach

This research uses annual time series data on inflation rates in The Gambia from 1962 to 2016, to model and forecast inflation using ARMA models. Diagnostic tests indicate that G is I(0). The study presents the ARMA (1, 0, 0) model [which is nothing but an AR (1) model]. The diagnostic tests further imply that the presented optimal ARMA (1, 0, 0) model is stable and indeed acceptable. The results of the study apparently show that G will be approximately 7.88% by 2020. Policy makers and the business community in The Gambia are expected to take advantage of the anticipated stable inflation rates over the next decade.