Modeling and forecasting inflation in Lesotho using Box-Jenkins ARIMA models

This research uses annual time series data on inflation rates in Lesotho from 1974 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that L is I(1). The study presents the ARIMA (0, 1, 2). The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 2) model is stable and acceptable for predicting inflation in Lesotho. The results of the study apparently show that L will be approximately 5.2% over the out-of-sample forecast period. The CBL is expected to tighten Lesotho’s monetary policy in order to maintain price stability