Predicting inflation in the Kingdom of Bahrain using ARIMA models

This research uses annual time series data on inflation rates in the Kingdom of Bahrain from 1966 to 2017, to model and forecast inflation using ARIMA models. Diagnostic tests indicate that Bahrain inflation series is I(1). The study presents the ARIMA (0, 1, 1). The diagnostic tests further imply that the presented optimal ARIMA (0, 1, 1) model is stable and acceptable for predicting inflation in the Kingdom of Bahrain. The results of the study apparently show that predicted inflation will be approximately 1.5% by 2020. Policy makers and the business community in the Kingdom of Bahrain are expected to take advantage of the anticipated stable inflation rates over the next decade