Abstrato

A Transfer Function-Autoregressive Noise Model of Naira Exchange Rates for Us Dollar and Swiss Franc

Iwok IA*

This work aims at modelling the Naira exchange rates for US Dollars X_t and Swiss Franc Y_t using a transfer function (TF) technique. Data for the two currencies were obtained from the Central Bank of Nigeria (for a period of 53 years). After obtaining stationarity of the two series using appropriate transformation, the input series xt was pre-whitened to remove the spurious correlation effect. The output series y_t was also pre-whitened and the cross correlation between the pre-whitened input (α_t) and output (β_t) was examined. From the behavior of the cross correlation, rational polynomial representation of the dynamic transfer function was obtained. The estimated noise was found to be auto correlated. Thus, the noise was modelled separately using Box and Jenkins autoregressive (AR) method. This provided the missing component of the TF model which was used to fit the overall model. The resulted model underwent a diagnostic check and was found to be appropriate. Hence forecast was generated.