Analyzing CPI dynamics in Italy

This research uses annual time series data on CPI in Italy from 1960 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the T series is I (2). The study presents the ARIMA (0, 2, 1) model for predicting CPI in Italy. The diagnostic tests further imply that the presented optimal model is actually stable and acceptable for predicting CPI in Italy over the period under study. The results of the study apparently show that CPI in Italy is likely to continue on an upwards trajectory in the next decade. The study basically encourages policy makers to make use of tight monetary and fiscal policy measures in order to control inflation in Italy