MODELLING OF FORECASTING MONTHLY INFLATION BY USING VARIMA AND GSTARIMA MODELS

The model parameters could be different form the well to the factors of time and location. A general model of GSTAR can be used to establish model the inflation in some locations by using GSTARIMA model if time series data is self-contained autoregressive, differentiation, and moving averages. This study examines whether the effect of such locations on the GSTARIMA model is better than the VARIMA model that regardless of the location influences. The aim of this study is to establish two models of inflation six provincial capitals in Java using VARIMA model and GSTARIMA model with inverse distance weighting. Dummy variables have been used to overcome normality and white noise problems. The best forecasting of monthly inflation in provincial captitals in Java Island is GSTAR(1;1) with inverse distance weighting. It has smallest RMSE value of 0.9199.Key words : GSTARIMA, Inverse Distance, RMSE, VARIM