IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpge/0307005.html
   My bibliography  Save this paper

A Non-parametric Bootstrap Simulation Study in ESTAR (1) Model

Author

Listed:
  • Liew Khim Sen

    (Universiti Putra Malaysia)

  • Ahmad Zubaidi Baharumshah

    (Universiti Putra Malaysia)

  • Choo Wei Chong

    (Universiti Putra Malaysia)

  • Habshah Midi

    (Universiti Putra Malaysia)

Abstract

Smooth Transition Autoregressive (STAR) model has been employed in a number of current studies dealing with non-linearities. The usefulness of this model has been documented in these studies. However, the population statistical properties of the parameters in this model remain unknown. This study attempts to investigate these properties through a non-parametric bootstrap simulation study. The exponential STAR model of order one, which is sufficient in providing us the necessary information on the linear and non-linear parameters as well as the speed of transition of the STAR model despite its simplicity, is employed in this study. This study also investigates the size effect of the bootstrapped estimators and their confidence intervals by varying the number of bootstrap replications. Results of this study show that their empirical distribution are asymmetrical in nature with the linear parameter being positively skewed and the non-linear and transition parameters being negatively skewed. Besides, we find that the normality theory over rejects the significance of the estimated transition parameter. Another interesting point worth mentioning is that the minimum number of replications needed for the bootstrap confidence interval to be a good approximate of the standard normal one is 500.

Suggested Citation

  • Liew Khim Sen & Ahmad Zubaidi Baharumshah & Choo Wei Chong & Habshah Midi, 2003. "A Non-parametric Bootstrap Simulation Study in ESTAR (1) Model," GE, Growth, Math methods 0307005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpge:0307005
    Note: Type of Document - Word
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ge/papers/0307/0307005.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ge/papers/0307/0307005.ps.gz
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ge/papers/0307/0307005.doc.gz
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Taylor, Mark P. & Peel, David A., 2000. "Nonlinear adjustment, long-run equilibrium and exchange rate fundamentals," Journal of International Money and Finance, Elsevier, vol. 19(1), pages 33-53, February.
    2. Sarantis, Nicholas, 1999. "Modeling non-linearities in real effective exchange rates," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 27-45, January.
    3. Liew Khim Sen & Ahmad Zubaidi Baharumshah, 2003. "How Well the Ringgit-Yen Rate Fits the Non-linear Smooth Transition Autoregressive and Linear Autoregressive Models," GE, Growth, Math methods 0307004, University Library of Munich, Germany.
    4. Godfrey, L. G., 1998. "Tests of non-nested regression models some results on small sample behaviour and the bootstrap," Journal of Econometrics, Elsevier, vol. 84(1), pages 59-74, May.
    5. Ahmad Baharumshah & Venus Liew, 2006. "Forecasting Performance of Exponential Smooth Transition Autoregressive Exchange Rate Models," Open Economies Review, Springer, vol. 17(2), pages 235-251, April.
    6. Baum, Christopher F. & Barkoulas, John T. & Caglayan, Mustafa, 2001. "Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era," Journal of International Money and Finance, Elsevier, vol. 20(3), pages 379-399, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Venus Khim-Sen Liew & Hock-Ann Lee & Kian-Ping Lim & Huay-Huay Lee, 2008. "Linearity and Stationarity of South Asian Real Exchange Rates," The IUP Journal of Applied Economics, IUP Publications, vol. 0(5), pages 48-58, September.
    2. Liew, Venus Khim-Sen & Baharumshah, Ahmad Zubaidi & Habibullah, Muzafar Shah & Midi, Habshah, 2008. "Monetary exchange rate model: supportive evidence from nonlinear testing procedures," MPRA Paper 7293, University Library of Munich, Germany.
    3. Mototsugu Shintani, 2006. "A nonparametric measure of convergence towards purchasing power parity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 589-604.
    4. Pippenger, John, 2004. "The Modern Theory of the LOP and PPP: Some Implications," University of California at Santa Barbara, Economics Working Paper Series qt60z886n7, Department of Economics, UC Santa Barbara.
    5. Gautam Goswami & Milind Shrikhande & Liuren Wu, 2002. "A Dynamic Equilibrium Model of Real Exchange Rates with General Transaction Costs," Finance 0207016, University Library of Munich, Germany.
    6. Baharumshah, Ahmad Zubaidi & Liew, Venus Khim-Sen & Chowdhury, Ibrahim, 2010. "Asymmetry dynamics in real exchange rates: New results on East Asian currencies," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 648-661, October.
    7. Miguel Carvalho & Paulo Júlio, 2012. "Digging out the PPP hypothesis: an integrated empirical coverage," Empirical Economics, Springer, vol. 42(3), pages 713-744, June.
    8. Carlo Altavilla & Paul De Grauwe, 2010. "Non-linearities in the relation between the exchange rate and its fundamentals," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(1), pages 1-21.
    9. Ahmad Zubaidi Baharumshah & Venus Khim-Sen Liew & Evan Lau, 2003. "Nonlinear Mean Reversion in Real Exchange Rates: Evidence from the ASEAN-5," International Trade 0308001, University Library of Munich, Germany.
    10. Venus Khim-Sen Liew & Terence Tai-Leung Chong & Kian-Ping Lim, 2003. "The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies," Applied Economics, Taylor & Francis Journals, vol. 35(12), pages 1387-1392.
    11. Kian-Ping Lim & Venus Khim-Sen Liew, 2003. "Testing for Non-Linearity in ASEAN Financial Markets," Finance 0308002, University Library of Munich, Germany.
    12. Daniel Buncic, 2019. "Identification and Estimation Issues in Exponential Smooth Transition Autoregressive Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(3), pages 667-685, June.
    13. Stephen Norman, 2009. "Testing for a unit root against ESTAR nonlinearity with a delay parameter greater than one," Economics Bulletin, AccessEcon, vol. 29(3), pages 2152-2173.
    14. Daniel Buncic, 2012. "Understanding forecast failure of ESTAR models of real exchange rates," Empirical Economics, Springer, vol. 43(1), pages 399-426, August.
    15. Milas Costas & Legrenzi Gabriella, 2006. "Non-linear Real Exchange Rate Effects in the UK Labour Market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(1), pages 1-34, March.
    16. Si Mohammed, Kamel & Chérif touil, Noreddine & Maliki, Samir, 2015. "An Empirical Test of Purchasing Power Parity of the Algerian Exchange Rate: Evidence from Panel Dynamic," MPRA Paper 75285, University Library of Munich, Germany.
    17. Param Silvapulle & Titi Kanti Lestari & Jae Kim, 2004. "Nonlinear Modelling of Purchasing Power Parity in Indonesia," Econometric Society 2004 Australasian Meetings 316, Econometric Society.
    18. Aidil Rizal SHAHRIN, 2015. "Has Nonlinearity Resolved The A Nomaly Of Unit Root Behaviour In Forward Discount ? New Empirical Evidence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 70-80, March.
    19. Gawon Yoon, 2010. "On the performance of a nonparametric measure of convergence towards purchasing power parity in the presence of linearity," Applied Economics Letters, Taylor & Francis Journals, vol. 17(14), pages 1389-1396.
    20. Sofiane Sekioua, 2004. "The forward unbiasedness hypothesis and the forward premium: a nonlinear analysis," Money Macro and Finance (MMF) Research Group Conference 2003 85, Money Macro and Finance Research Group.

    More about this item

    Keywords

    non-parametric bootstrap; ESTAR model; confidence intervals; statistical distribution;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpge:0307005. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.