Intervention Analysis of Daily Indian Rupee/Nigerian Naira Exchange Rates

Time series plot of a realization of daily exchange rates of Indian Rupee and Nigerian Naira from 18th March, 2017 to 10th September, 2017 shows the occurrence of an intervention on 4th August, 2017. This research work has an aim of proposing an intervention model to explain the impact of this intervention believed to be due to the economic recession in Nigeria. Pre-intervention series is observed to be stationary by the Augmented Dickey Fuller Test. Following the shown autocorrelation structure of the series, an adequate subset ARMA(13, 12) model is fitted to it. On the basis of this model forecasts are made for the post-intervention period. Difference between these forecasts and their corresponding actual observations are modeled to obtain the intervention transfer function and the desired overall intervention model. Management of these exchange rates may be made on the basis of this model.