Journal of Modern Mathematics and Statistics
ISSN: OnlineISSN: Print 1994-5388
Abstract
South African economy has been said to be fuel price dependent and that the fuel price keeps increasing on yearly basis. Thus, there is a need to develop a scientific model to predict the behaviour and future values of fuel prices and exchange rates. This study employs an Autoregressive Integrated Moving Average (ARIMA) in predicting the fuel prices and the strength of the South African rand in the international market based on the 35 years monthly data. The prices of fuel exhibit an upward trend variation. Among the competing models estimated per each variable, ARIMA (3, 1, 1), ARIMA (3, 1, 1), ARIMA (1, 1, 2) and ARIMA (1, 0, 1) are respectively found to be the best for modeling and predicting the behaviour and future values of diesel, paraffin, petrol and exchange rate (ZAD-USD). Their respective forecasting accuracy are 93.4, 91.7, 91.5 and 79.3%, respectively. Hence, predicting the future values of fuel prices and the strength of South African currency against the United States of America dollars using these models will help the policymakers and all stakeholders make well-informed decisions in planning. Further research can be carried out on the short and long-run relationship between the four variables. Also, the direction of causality among the variables should be looked into to determine which variable can be used to determine the future values of the other.
How to cite this article:
Matthew Femi Olayiwola and Samuel Babajide Atoyebi. Box-Jerkins Approach to Fuel Prices and Currency Strength in the International Market.
DOI: https://doi.org/10.36478/jmmstat.2021.8.15
URL: https://www.makhillpublications.co/view-article/1994-5388/jmmstat.2021.8.15