Does the observed value of Somali shilling deviate from its predicted value?

Abstract

Listen

Translate article

Somali economy has been functioning informally for the last two decades and the foreign exchange market has been functioning under mutual trust and customary laws. The study examines whether the observed value of Somali shilling (SOS) deviates from its predicted one. The study used two-stage modeling technique where ARMA and co-integration are used as an input selection techniques and ANN is used in the forecasting stage. The study found that overvaluation is more likely than undervaluation in Somalia. This implies speculators with the interest of making short term profits may dominate the market, which will have miserable economic consequences.