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on Econometrics |
| By: | Giulio Bottazzi; Angelo Secchi |
| Abstract: | We introduce a new 5-parameter family of distributions, the Asymmetric Exponential Power (AEP), able to cope with asymmetries and leptokurtosis and at the same time allowing for a continuous variation from non-normality to normality. We prove that the Maximum Likelihood (ML) estimates of the AEP parameters are consistent on the whole parameter space, and when sufficiently large values of the shape parameters are considered, they are also asymptotically efficient and normal. We derive the Fisher information matrix for the AEP and we show that it can be continuously extended also to the region of small shape parameters. Through numerical simulations, we find that this extension can be used to obtain a reliable value for the errors associated to ML estimates also for samples of relatively small size ( 100 observations). Moreover we find that at this sample size, the bias associated with ML estimates, although present, becomes negligible. |
| Keywords: | Maximum Likelihood estimation, Asymmetric Exponential Power, Information matrix |
| Date: | 2006–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2006/19&r=ecm |
| By: | Menzie D. Chinn; Ron Alquist |
| Abstract: | We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of net exports and net foreign assets. In addition to bringing Gourinchas and Rey’s new approach and more recent data to bear, we implement the Clark and West (forthcoming) procedure for testing the significance of out-of-sample forecasts. The interest rate parity relation holds better at long horizons and the net exports variable does well in predicting exchange rates at short horizons in-sample. In out-of-sample forecasts, we find evidence that our proxy for Gourinchas and Rey’s measure of external imbalances outperforms a random walk at short horizons as do some of other models, although no single model uniformly outperforms the random walk forecast. |
| JEL: | F31 F47 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12481&r=ecm |
| By: | Kleopatra Nikolaou (Warwick Business School, Finance Group, Univeristy of Warwick, Coventry, CV32 7AL, United Kingdom.) |
| Abstract: | We test for mean reversion in real exchange rates using a recently developed unit root test for non-normal processes based on quantile autoregression inference in semi-parametric and non-parametric settings. The quantile regression approach allows us to directly capture the impact of different magnitudes of shocks that hit the real exchange rate, conditional on its past history, and can detect asymmetric, dynamic adjustment of the real exchange rate towards its long run equilibrium. Our results suggest that large shocks tend to induce strong mean reverting tendencies in the exchange rate, with half lives less than one year in the extreme quantiles. Mean reversion is faster when large shocks originate at points of large real exchange rate deviations from the long run equilibrium. However, in the absence of shocks no mean reversion is observed. Finally, we report asymmetries in the dynamic adjustment of the RER. JEL Classification: F31. |
| Keywords: | Real exchange rate,purchasing power parity, quantile regression. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20060667&r=ecm |
| By: | C. Monfardini; J.M.C. Santos Silva |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:558&r=ecm |