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Forecasting the Volatility of Egyptian Inflation Using Garch Models

Medhat M.A. Abdelaal, Mamdouh Abdel Aleem Saad, Hisham Abdel-Tawab Mahran Morsy, Muhamed Wael Farouq


The inflation rate series is the one of financial time series that exhibit certain patterns which are crucial for correct model specification, estimation and forecasting, such as Leptokurtosis and Volatility clustering. The objective of the present study is develops a short-term forecasting model that explores the volatility feature of Egyptian inflation rate. Through sample data set covers the period from January 1996 to July 2010 which includes 175 monthly observations, the present study found that the inflation rate for August 2010 is 1.01010 with 95% confidence interval (-1.04965 to 3.06986) while for September is 1.21618 with 95% confidence interval (-.63268 to 3.06502). The variance of the errors for the same periods will be decrease from 1.06 to 0.80 with 24.52% percentage change.


Inflation Rate, Volatility, GARCH Model.

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