Unobserved component model with multi-interval input interventions: An application to crude oil production

Abstract

In this paper, a multi-interval input intervention unobserved component model (MIII-UCM) is developed to model the crude oil production series. The focus of this study is on the development of a model that could be used to model and evaluate the effects of the military crackdown, presidential amnesty program, and Niger Delta avenger insurgency respectively. The monthly crude oil production dataset from the web database of the central bank of Nigeria (CBN) was used. The proposed UCM-intervention model with significant unobserved stochastic level, deterministic trigonometric seasonal, stochastic irregular term and pulse intervention functions based on the Akaike's information criteria (AIC), Schwartz's Bayesian Information Criteria (BIC), goodness-of-fit and significance tests captured the structural variability of the time series used in this study. The results showed that step intervention functions yield negative nonsignificant effects. Generally, the military crackdown on militant groups, the presidential amnesty program, and Niger Delta avenger insurgency presented a negative nonsignificant shift on crude oil production.