📄 Abstract
This study investigates trends in Kenya?s Consumer Price Index (CPI) as a measure of cost of living, utilizing historical data from 1970 to 2022 and applying an autoregressive integrated moving average (ARIMA) model. Time-series data sourced from the World Bank employs CPI (2010 = 100) as the dependent variable, with autoregressive (AR) and moving average (MA) components as independent variables. Parameter estimation, conducted using generalized least squares (GLS), identifies negative and statistically significant coefficients for AR(1) (-0.602924) and MA(2) (-0.748163), reflecting short-term fluctuations and mean-reverting tendencies. The estimated ARIMA (1, 2, 2) model is covariance stationary and invertible, confirming its reliability for forecasting CPI trends. Projections for 2023-2042 indicate gradual CPI stabilization, with minor fluctuations averaging 0.26%. The findings underscore the need for sustained inflation-targeting measures and sound monetary policies to enhance price stability, thereby mitigating cost-of-living pressures and promoting economic resilience.
📚 How to Cite:
Nahabwe Patrick Kagambo John, Kagarura Willy Rwamparagi , MODELLING COST OF LIVING IN KENYA , Volume 12 , Issue 1, january 2025, EPRA International Journal of Socio-Economic and Environmental Outlook(SEEO) ,