The Performance of SETAR models by Regime: A Conditional Evaluation of Interval and Density Forecasts

Emanuela Marrocu and Gianna Boero ()

No 147, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: The aim of this paper is to analyse the out-of-sample performance of SETAR models using daily data for the Euro effective exchange rate. The evaluation is conducted on point, interval and density forecasts. The benchmark used for the comparison is a linear AR model for point forecast evaluation and a GARCH model for interval and density forecasts. In each case the models are evaluated unconditionally, over the whole forecast period, and conditionally, on the regimes of the SETAR models. The results show that, in general, the performance of the SETAR models improves significantly for the forecasts governed by the regime(s) with fewer observations. However, overall the GARCH model is better able to capture the distributional features of the series and to predict higher ordered moments.

Keywords: SETAR models; point forecasts; interval forecasts; density forecasts; Euro effective exchange rate (search for similar items in EconPapers)
JEL-codes: C22 C51 C53 E17 (search for similar items in EconPapers)
Date: 2003-06-04
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ifn
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Citations: View citations in EconPapers (4)

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