Intervention Model Based on Exponential Smoothing Methods and ARIMA Modelling of the Nigerian Naira Exchange Rates

Elisha J. Inyang¹

Section:Research Paper, Product Type: Journal-Paper
Vol.11 , Issue.1 , pp.24-33, Feb-2024

Online published on Feb 28, 2024

Copyright © Elisha J. Inyang . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
Nigeria`s poor handling of the currency crisis has made exchange rates the country`s main issue. This is made worse by her near total reliance on imports for consumption and her need for foreign cash from the export of crude oil. Consequently, Nigeria`s economic success is heavily reliant on the fluctuations of other global currencies. The study is aimed at modelling exchange rates between the Nigerian naira and the Pakistani rupee during a financial slump using an intervention modelling approach constructed on exponential smoothing methods and the ARIMA model with a view to making comparisons. The dataset used in this study is the daily exchange rates of Pakistani rupees to Nigerian naira spanning from January to December 2016. Results revealed that the 2016 economic downturn had a negative impact on the naira, with a percentage change of 47.51. This implies that rupees appreciated over the naira such that Rs1 PKR = 1.9524 NGN compared to the periods before and after the intervention occurred. The economic recession was considered a step function with a delay of 1 period and a gradual-permanent effect with a decay rate of 0.60. Comparatively speaking, nonetheless, the ARIMA-intervention model outperformed the ETS-intervention model.

Key-Words / Index Term :
Exponential smoothing methods, ARIMA, Intervention model, Exchange rates.

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