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Financial and Economic time series literatures have shown that financial and economic time series data exhibit non-linearity in their behavior. In order to be mindful of such behavior as applied to Nigeria inflation rates, this study therefore, applies a two stages non-linear self-exciting threshold autoregressive model (SETAR) to Nigeria inflation rates. The results obtained for both in-sample and out-of-sample forecast performances for SETAR model were compared with results of linear seasonal autoregressive integrated moving average (SARIMA). On the basis of in-sample forecast performance of linear SARIMA and non-linear SETAR, using performance measure indices like MAE and RMSE, the results obtained indicated that non-linear SETAR model performed better than linear SARIMA. So also for the out-of-sample forecast performance using multi-step ahead forecast performance, the results also indicated that non-linear SETAR out performed linear SARIMA. |
