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Home  >  Volume 22 (2012)

Modeling Nigeria External Reserves for National Transformation by Iwueze I. S., Nwogu E. C. and Nlebedim V. U. Volume 22 (November, 2012), pp 295 – 306
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Abstract

This paper discusses the levels and trend of external reserves in Nigeria. The relevance of this lies in the fact that it could help to monitor the reserves and throw early warning signal about economic crisis. Transformed monthly data on external reserves for the period January 1999 to December, 2008 derived from the 2008 CBN Statistical Bulletin was analysed using ARIMA model. Results of the analyses show that (i) the data requires logarithm transformation to stabilize the variance and (ii) the appropriate model that best describes the pattern in the transformed data is the autoregressive process of order two [AR(2)]. This model is recommended for use until further analysis proves otherwise.

Keywords: External reserves, autoregressive process, transformation, variance stability, payment imbalances.

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