The Appropriate Model and Dependence Measures of Thailand’s Exchange Rate and Malaysia’s Exchange Rate: Linear, Nonlinear and Copulas Approach

Pisit Leeahtam, Chukiat Chaiboonsri, Kanchana Chokethaworn, Prasert Chaitip and Songsak Sriboonchitta
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Pisit Leeahtam: Dean of Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand
Chukiat Chaiboonsri: Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand
Kanchana Chokethaworn: Assoc. Prof., Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

Journal of Knowledge Management, Economics and Information Technology, 2011, vol. 1, issue 6, 14

Abstract: The objectives of this study are to find the fitting model and dependence measures of both Thailand’s exchange rate and Malaysia’s exchange rate during, between, and after the World’s recent financial crises based on linear, nonlinear and empirical copula approaches. The results of the study confirm that the nonlinear model (NNTs) is an appropriate model for Thailand’s exchange rate return in percentage during the periods of 2008-2011but not for Malaysia’s exchange rate return. Based on empirical copula approach, the dependence measures are very small between Thailand’s exchange and Malaysia’s exchange. This seems to suggest that when global economy is affected by World’s financial crisis, the nonlinear approach should be used to predict Thailand’s exchange rate return in percentage. In addition, it suggests that both the nonlinear and linear approaches should be used to predict the Malaysia’s exchange rate return in percentage. Moreover, the relationship between the exchange rate of Thailand and that of Malaysia is not strong. This is also true for the currencies of both countries.

Keywords: Linear; Nonlinear; Copulas; Exchange Rate; Thailand; Malaysia The Appropriate Forecasting Model (search for similar items in EconPapers)
Date: 2011
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