| | |

KARACHI INTER-BANK OFFERED RATE (KIBOR) FORECASTING: BOX-JENKINS (ARIMA) TESTING APPROACH


Finance

KARACHI INTER-BANK OFFERED RATE (KIBOR) FORECASTING: BOX-JENKINS (ARIMA) TESTING APPROACH

Name and surname of author:

Rizwan Raheem Ahmed, Jolita Vveinhardt, Nawaz Ahmad, Dalia Štreimi

Year:
2017
Volume:
20
Issue:
2
Keywords:
KIBOR, ARMA, Box-Jenkins, ARIMA, forecasting
DOI (& full text):
Anotation:
The aim of this paper is to find out the forecasting model that is the one, which gives the best output of forecasting. So that policy makers can be benefited from this research. Thus, this research…more
The aim of this paper is to find out the forecasting model that is the one, which gives the best output of forecasting. So that policy makers can be benefited from this research. Thus, this research will also evaluate the performance of ARMA, and Box-Jenkins (ARIMA) forecasting models for KIBOR in case of Pakistan. Karachi Inter Bank Offer Rates (KIBOR) is the average interest rate at which banks want to lend money to other banks. KIBOR as a benchmark, to encourage transparency, to promote consistency in market based pricing and to improve management of the market risk undertaken by banks. Researchers have used 6-month rates of KIBOR; data is of 4 years from 2012 to 2015. Therefore, keeping in view of the importance of KIBOR, the objective of this research is to forecast, Karachi Inter Bank Offer Rates (KIBOR) using time series autoregressive moving average (ARMA), Box-Jenkins (ARIMA) model. The study is significant at 1%, the forecasting of rates shows that the rates are very close to the actual one and it further concluded that the applied model Box-Jenkins (ARIMA) is perfect for the forecasting. The results of AIC revealed that there is no evidence of autocorrelation and there is no sample error and the model is useful and robust. It is finally concluded that the forecasting of KIBOR rates by ARIMA (Box-Jenkins) model is very helpful for policy makers. The results extracted from this model are reliable for making any forecasting and also beneficial for government functionaries, financial experts and policy makers of financial institutions in order to device their future strategies.
Section:
Finance

?
NAPOVEDA
reguired
Language