Modelling and Forecasting Narrow Money in Ghana.

Abstract

Narrow Money is a category of money supply that includes all physical money like coins and currency along with demand deposits and other liquid assets held by the central bank. Narrow money is the most accessible money in an economy, it is restricted to paper currency, coins and demand deposits (money in checking accounts, savings accounts and other highly liquid accounts) and it is also the most liquid form of money. Monthly recorded Narrow Money data between the years 2000 to 2015 were obtained from the Bank of Ghana website. Monthly seasonal Indices are calculated as well as descriptive statistics and fitted ACF, PACF, and time series plot of Narrow Money. By the application of Box -Jenkins method, the data was analyzed and used to identify the best ARIMA model. The model works in stages, first stage is how to identify the appropriate ARIMA model. The second stage is to estimate the parameters of the ARIMA model chosen, the third stage is the diagnostic checking of model and the final stage is where the analysis is based on the model chosen to forecast the future occurrence. The researchers used statistical programs such as R-software and Minitab in the data analysis in the study.