EconPapers    
Economics at your fingertips  
 

Forecasting Performance of Exponential Smooth Transition Autoregressive Exchange Rate Models

Ahmad Zubaidi Baharumshah () and Venus Liew ()

Open Economies Review, 2006, vol. 17, issue 2, 235-251

Abstract: This paper compares the forecasting performance of the Smooth Transition Autoregressive (STAR) model with the conventional linear Autoregressive (AR) and Simple Random Walk (SRW) models. The empirical analysis was conducted using quarterly data for the yen-based currencies of six major East Asian countries. We discovered strong evidence on nonlinear mean reversion in deviation from purchasing power parity (PPP). The results suggest that both the STAR and AR models outperform or at least match the performance of the SRW model. The results also show that the STAR model outperforms the AR model, its linear competitor in a 14-quarter forecast horizon. This finding is consistent with the emerging line of research that emphasizes the importance of allowing nonlinearity in the adjustment of exchange rate. Copyright Springer Science + Business Media, LLC 2006

Keywords: autoregressive; smooth transition autoregressive; nonlinear time series; forecasting accuracy (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1007/s11079-006-6812-7 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:17:y:2006:i:2:p:235-251

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-06-19
Handle: RePEc:kap:openec:v:17:y:2006:i:2:p:235-251