Abstract:
The monthly Colombo Consumer Price Index (CCPI) is the most widely
used tool for measuring changes in the inflation which are important in
formulating economic policies and making investment decisions.
However, no methodology has been developed so far to predict CCPI at
least one month ahead. Using monthly series of CCPI from January
2003 to December 2010, ARIMA (1, 1, and 1) model was identified as
the best fitted for the CCPI series. The error series of the fitted model
was found to be a white noise process. The model was also tested to an
independent data set using CCPI index from January 2011 to May 2011.
