Modelling the Ghanaian Inflation Rates Using Interrupted Time Series Analysis Approach

Abstract

The article considers the application of interrupted time series analysis to model yearly inflation rates in Ghana from 1996 to 2006. This article, therefore, explored the effectiveness of the economic policy intervention in the year 2001 on the inflation rate time series for the period 2001 to 2006 using the interrupted time series experiment. We also sort to use this model to make forecasts of future values. To achieve this objective, yearly inflation rates for the period were obtained from Bank of Ghana (BoG). The Box-Jenkins Autoregressive Integrated Moving Average (ARIMA) method with interruption was employed in analyzing the data using Statistical Product for Service Solution (SPSS) version 20. It was found that the rate of inflation in Ghana can be fitted with an autoregressive model of order one, i.e. AR (1) model. From the results of the tests of the difference between the means before and after intervention, as well as the interrupted time series experiment, indicated that the intervention successfully reduced the rate of inflation in the Ghana’s economy.

Keywords: Inflation, Interrupted Time Series, Box-Jenkins Method.