Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau

Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau

The Exponential Smooth Transition Autoregressive (ESTAR) model is widely adopted in exchange rate studies as its symmetrical distribution matches that of symmetrical exchange rate adjustment behaviour. In contrast, another specification of the STAR model, namely the LSTAR (logistic STAR) model is di...

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Format: Article
Language:English
Published: Universiti Teknologi MARA, Sarawak 2005
Online Access:http://ir.uitm.edu.my/id/eprint/16769/
http://ir.uitm.edu.my/id/eprint/16769/1/AJ_VENUS%20KHIM-SEN%20LIEW%20JAS%2005.pdf
id uitm-16769
recordtype eprints
spelling uitm-167692017-05-08T03:23:40Z http://ir.uitm.edu.my/id/eprint/16769/ Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau The Exponential Smooth Transition Autoregressive (ESTAR) model is widely adopted in exchange rate studies as its symmetrical distribution matches that of symmetrical exchange rate adjustment behaviour. In contrast, another specification of the STAR model, namely the LSTAR (logistic STAR) model is discarded by most researchers in priori in their exchange rate modeling exercises due to its undesired property of being asymmetrical. This study is the first of its kind in examining the validity of this hypothesis that the ESTAR exchange rate model is superior to the LSTAR exchange rate model on the basis of forecasting accuracy. Based on the experience of the adjustment process of two nominal exchange rates, we find that the hypothesis is merely theoretical since we fail to provide consistent empirical evidence in favour of the null hypothesis. This warns us that we need not be too pessimistic on the usage of the LSTAR model in exchange rate studies. In our effort to rekindle the usage of the LSTAR model, we further reparameterized the original version into the so-called absolute version, which has symmetrical distribution properties, in accordance with the well-known symmetrical adjustment process of exchange rates. The resulting ALSTAR model has proven to be a more promising model in the sense that it has improved significantly from its original version as well as the ESTAR model, which has thus far been deemed the most appropriate nonlinear exchange rate model. Universiti Teknologi MARA, Sarawak 2005 Article PeerReviewed text en http://ir.uitm.edu.my/id/eprint/16769/1/AJ_VENUS%20KHIM-SEN%20LIEW%20JAS%2005.pdf UNSPECIFIED (2005) Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau. Jurnal Akademik UiTM Sarawak. pp. 79-91. ISSN 0128-2635
repository_type Digital Repository
institution_category Local University
institution Universiti Teknologi MARA
building UiTM Institutional Repository
collection Online Access
language English
description The Exponential Smooth Transition Autoregressive (ESTAR) model is widely adopted in exchange rate studies as its symmetrical distribution matches that of symmetrical exchange rate adjustment behaviour. In contrast, another specification of the STAR model, namely the LSTAR (logistic STAR) model is discarded by most researchers in priori in their exchange rate modeling exercises due to its undesired property of being asymmetrical. This study is the first of its kind in examining the validity of this hypothesis that the ESTAR exchange rate model is superior to the LSTAR exchange rate model on the basis of forecasting accuracy. Based on the experience of the adjustment process of two nominal exchange rates, we find that the hypothesis is merely theoretical since we fail to provide consistent empirical evidence in favour of the null hypothesis. This warns us that we need not be too pessimistic on the usage of the LSTAR model in exchange rate studies. In our effort to rekindle the usage of the LSTAR model, we further reparameterized the original version into the so-called absolute version, which has symmetrical distribution properties, in accordance with the well-known symmetrical adjustment process of exchange rates. The resulting ALSTAR model has proven to be a more promising model in the sense that it has improved significantly from its original version as well as the ESTAR model, which has thus far been deemed the most appropriate nonlinear exchange rate model.
format Article
title Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau
spellingShingle Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau
title_short Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau
title_full Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau
title_fullStr Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau
title_full_unstemmed Forecasting performance of logistic star exchange rate model: the original and reparameterised versions / Venus Khim-Sen Liew, Ahmad Zubaidi Baharumshah and Sie-Hoe Lau
title_sort forecasting performance of logistic star exchange rate model: the original and reparameterised versions / venus khim-sen liew, ahmad zubaidi baharumshah and sie-hoe lau
publisher Universiti Teknologi MARA, Sarawak
publishDate 2005
url http://ir.uitm.edu.my/id/eprint/16769/
http://ir.uitm.edu.my/id/eprint/16769/1/AJ_VENUS%20KHIM-SEN%20LIEW%20JAS%2005.pdf
first_indexed 2023-09-18T22:56:49Z
last_indexed 2023-09-18T22:56:49Z
_version_ 1777417909160640512

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