Abstract
In this paper, two models of forecasting are used the Box-Jenkins procedure employing the SARIMA and the Holt-Winters triple exponential smoothing. Published Consumer Price Index Data from Kenya National Bureau of Statistics (KNBS) for the period November 2011 to October 2016 was used. This paper we equate the forecasted values of both the models and we choose the best model based on the least mean Absolute square error (MASE), mean absolute error (MAE) and mean absolute percentage error (MAPE). The three step model building for Box-Jenkins was first employed, followed by the Hold-Winters triple exponential smoothing. The study found the SARIMA Model was a better model than the Holt-winters triple exponential smoothing as per the obtained results using MASE, MAE and MAPE.
Highlights
Introduction and MotivationInflation is the rate at which the general level of prices for goods and services in an economy rises and affecting the purchasing power of currency to fall
In Kenya Consumer Price Index is used in calculation of Inflation rates on yearly basis even though data is collected and computed monthly basis by the Kenya National Bureau of Statistics (KNBS)
KNBS, defines Consumer Price Index (CPI) is defined as a measure of the weighted aggregate change in retail prices paid by consumers for a given basket of goods and services
Summary
Inflation is the rate at which the general level of prices for goods and services in an economy rises and affecting the purchasing power of currency to fall. In Kenya Consumer Price Index is used in calculation of Inflation rates on yearly basis even though data is collected and computed monthly basis by the KNBS. KNBS, defines Consumer Price Index (CPI) is defined as a measure of the weighted aggregate change in retail prices paid by consumers for a given basket of goods and services. Price changes are measured by re-pricing the same basket of goods and services at regular intervals, and comparing aggregate costs with the costs of the same basket in a selected base period Price data for constructing the indices are collected by Kenya National Bureau of Statistics through a survey of retail prices for consumption of goods and services. Inflation problems could cause living conditions in a country much harder to lot of people
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