USING EXPONENTIAL SMOOTHING METHOD IN FORECASTING DOMESTIC CREDIT TO PRIVATE SECTOR OF GHANA

The private sector of Ghana faces many problems with respect to raising capital for their operations; this is largely due to government relying heavily on the local credit market for funds for developmental projects. This study uses exponential smoothing method (ESM) in EViews to build a single sample model to forecast future domestic credit to private sector (DCPS) values in Ghana. Secondary annual data on DCPS spanning the period from 1982 to 2016 is used. The findings show that an exponential smoothing model with multiplicative error, additive trend and no seasonality fits the data best. The model had very small residual measures, which demonstrates a good model for forecasting. The estimated model is used to forecast the DCPS values for Ghana from the year 2017 to 2020. The results of this study will help private business people plan for the future. The results will also help policy makers to make informed decisions and formulate policies to improve the DCPS figures, since the private sector is the engine of growth, and crowding out would not be in the best interest of the government and the nation as a whole.