The Efficacy of ARIMAX and SARIMA Models in Predicting Monthly Currency in Circulation in Ghana

Abstract

In this study, the efficacy of the ARIMAX model and SARIMA model in forecasting the Currency in Circulation in Ghana was compared. Both models appear to be adequate for forecasting the Currency in Circulation. Diagnostic tests of both models with the Ljung-Box test and ARCH-LM test revealed that both models were free from higher-order serial correlation and conditional heteroscedasticity respectively. The Diebold-Mariano test revealed that there is no significant difference in the forecasting performance of the two models. Hence, both models were proposed for predicting the Currency in Circulation. However, we recommend that continues monitoring of the forecasting performance of these models, review of market conditions and necessary adjustments are vital to make the use of these models more realistic.

Keywords: ARIMAX, SARIMA, Currency in Circulation, Ghana, forecasting