Modeling of the Intervention of Daily Swiss Franc (CHF)/ Nigerian Naira (NGN) Exchange Rates
Ette Harrison Etuk & Obianuju Kelechi Ntagu
Department of Mathematics
Rivers State University, Port Harcourt, Nigeria
Corresponding author: Ette Harrison EtukEmail:etuk.ette@ust.edu.ng
ABSTRACT
This research work is concerned with the modeling of daily exchange rates of Swiss Franc (CHF) and the Nigerian Naira (NGN). The data started from 18th May 2016 to 16th November 2016. The time plot shows an abrupt rise on 21st June 2016 in the quantity of Naira to the Franc. This is the intervention point. It is believed that this is due to the current epression in the Nigerian economy. The pre-intervention rates show a generally upward trend and are adjudged stationary by the Augmented Dickey Fuller (ADF) test. First-order differencing rids it of non-stationarity. Going by its autocorrelation structure a subset AR(5) is fitted to it. Forecasts on the basis of it were made for the post-intervention part of the series. Difference between these forecasts and their corresponding actual observations was modeled to get the transfer function and this function was observed to be statistically significant. This indicates model adequacy. No wonder there is a very close agreement between the intervention forecasts and their corresponding post-intervention exchange rates. This model may be used as the basis of management of the situation.
Keywords: Swiss Franc, Nigerian Naira, exchange rates, Arima modeling
