The out-of-sample forecasting performance of non-linear models of real exchange rate behaviour: The case of the South African Rand
This paper analyses the out-of-sample forecasting performance of non-linear vs. linear models for the South African rand against the United States dollar and the British pound, in real terms. We compare the forecasting performance of point, interval and density forecasts for non-linear Band-TAR and ESTAR models to linear autoregressive models. Our data spans from 1970:01 to 2012:07, and we found that there are no significant gains from using either the Band-TAR or ESTAR non-linear models, compared to the linear AR model in terms of out-of-sample forecasting performance, especially at short horizons. We draw similar conclusions to other literature, and find that for the South African rand against the United States dollar and British pound, non-linearities are too weak for Band-TAR and ESTAR models to estimate.
Volume (Year): 10 (2013)
Issue (Month): 1 (April)
|Contact details of provider:|| Postal: Corso Matteotti 22 - Castellanza (VA) 21053|
Phone: +39 (0)331-572 1
Fax: +39 (0)331-572 320
Web page: http://eaces.liuc.it/default.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lumengo Bonga-Bonga, 2008.
"Modeling the Rand-Dollar Future Spot Rates: The Kalman Filter Approach,"
98, Economic Research Southern Africa.
- Lumengo Bonga-Bonga, 2008. "Modelling the Rand-Dollar Future Spot Rates: The Kalman Filter Approach," The African Finance Journal, Africagrowth Institute, vol. 10(2), pages 60-75.
- Taylor, Mark P & Peel, David A & Sarno, Lucio, 2001.
"Nonlinear Mean-Reversion in Real Exchange Rates: Toward a Solution to the Purchasing Power Parity Puzzles,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1015-42, November.
- Peel, David & Sarno, Lucio & Taylor, Mark P, 2001. "Nonlinear Mean-Reversion in Real Exchange Rates: Towards a Solution to the Purchasing Power Parity Puzzles," CEPR Discussion Papers 2658, C.E.P.R. Discussion Papers.
- Maurice Obstfeld & Alan M. Taylor, 1997.
"Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited,"
NBER Working Papers
6053, National Bureau of Economic Research, Inc.
- Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
- Maurice Obstfeld and Alan M. Taylor., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Center for International and Development Economics Research (CIDER) Working Papers C97-088, University of California at Berkeley.
- Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," CEPR Discussion Papers 1672, C.E.P.R. Discussion Papers.
- Hendrik Kaufmann & Florian Heinen & Philipp Sibbertsen, 2014.
"The Dynamics Of Real Exchange Rates: A Reconsideration,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 29(5), pages 758-773, 08.
- Heinen, Florian & Kaufmann, Hendrik & Sibbertsen, Philipp, 2011. "The dynamics of real exchange rates - A reconsideration," Hannover Economic Papers (HEP) dp-463, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Sami Alpanda & Kevin Kotzé & Geoffrey Woglom, 2011. "Forecasting Performance Of An Estimated Dsge Model For The South African Economy," South African Journal of Economics, Economic Society of South Africa, vol. 79(1), pages 50-67, 03.
- Lumengo Bonga-Bonga, 2009. "Forward Exchange Rate Puzzle: Joining the Missing Pieces in the Rand-US Dollar Exchange Market," Working Papers 122, Economic Research Southern Africa.
- Diebold, Francis X & Mariano, Roberto S, 1995.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 13(3), pages 253-63, July.
- Tom Doan, . "DMARIANO: RATS procedure to compute Diebold-Mariano Forecast Comparison Test," Statistical Software Components RTS00055, Boston College Department of Economics.
- Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
- Rangan Gupta & Alain Kabundi, 2010.
"Forecasting macroeconomic variables in a small open economy: a comparison between small- and large-scale models,"
Journal of Forecasting,
John Wiley & Sons, Ltd., vol. 29(1-2), pages 168-185.
- Rangan Gupta & Alain Kabundi, 2008. "Forecasting Macroeconomic Variables in a Small Open Economy: A Comparison between Small- and Large-Scale Models," Working Papers 200830, University of Pretoria, Department of Economics.
- Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
- Valentina Corradi & Norman R. Swanson, 2003.
"Bootstrap Conditional Distribution Tests In the Presence of Dynamic Misspecification,"
Departmental Working Papers
200311, Rutgers University, Department of Economics.
- Corradi, Valentina & Swanson, Norman R., 2006. "Bootstrap conditional distribution tests in the presence of dynamic misspecification," Journal of Econometrics, Elsevier, vol. 133(2), pages 779-806, August.
- Michael, Panos & Nobay, A Robert & Peel, David A, 1997.
"Transactions Costs and Nonlinear Adjustment in Real Exchange Rates: An Empirical Investigation,"
Journal of Political Economy,
University of Chicago Press, vol. 105(4), pages 862-79, August.
- Tom Doan, . "RATS programs to replicate Michael-Nobay-Peel ESTAR models," Statistical Software Components RTZ00113, Boston College Department of Economics.
- Mtonga, Elvis, 2006. "The real exchange rate of the rand and competitiveness of South Africa's trade," MPRA Paper 1192, University Library of Munich, Germany.
- Diebold, Francis X. & Nason, James A., 1990.
"Nonparametric exchange rate prediction?,"
Journal of International Economics,
Elsevier, vol. 28(3-4), pages 315-332, May.
- Christoffersen, Peter F, 1998. "Evaluating Interval Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 841-62, November.
- Riane de Bruyn & Rangan Gupta & Renee van Eyden, 2013. "Forecasting The Rand-Dollar And Rand-Pound Exchange Rates Using Dynamic Model Averaging," Working Papers 201307, University of Pretoria, Department of Economics.
- Siliverstovs, B. & van Dijk, D.J.C., 2003. "Forecasting industrial production with linear, nonlinear, and structural change models," Econometric Institute Research Papers EI 2003-16, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
When requesting a correction, please mention this item's handle: RePEc:liu:liucej:v:10:y:2013:i:1:p:121-148. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Piero Cavaleri)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.