The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies
Utilizing the formal linearity test of Luukkonen, Saikkonen and Tera¨ svirta (Biometrika, 75, 491–99, 1998) as diagnostic tool, the empirical finding suggests that the linear autoregressive (AR) model is inadequate in describing the real exchange rates behaviour of 11 Asian economies. It is noted th...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2003
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| Online Access: | http://ir.unimas.my/id/eprint/18638/ http://ir.unimas.my/id/eprint/18638/7/The%20inadequacy%20of%20linear%20autoregressive%20model%20%28abstract%29.pdf |
| _version_ | 1848838554922254336 |
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| author | Liew, Venus Khim-Sen Chong, Terrence Tai-Leung Lim, Kian-Ping |
| author_facet | Liew, Venus Khim-Sen Chong, Terrence Tai-Leung Lim, Kian-Ping |
| author_sort | Liew, Venus Khim-Sen |
| building | UNIMAS Institutional Repository |
| collection | Online Access |
| description | Utilizing the formal linearity test of Luukkonen, Saikkonen and Tera¨ svirta (Biometrika, 75, 491–99, 1998) as diagnostic tool, the empirical finding suggests that the linear autoregressive (AR) model is inadequate in describing the real exchange rates behaviour of 11 Asian economies. It is noted that the conventional battery of diagnostic tests is capable of identifying the inadequacy of the linear model in only three of these series. Moreover, the linearity nature of this behaviour
has been formally rejected in favour of the non-linear smooth transition autoregressive (STAR) model. The finding of non-linearity in the data generating process of these real exchange rates warrants that the use of linear framework in empirical
modelling and statistical testing procedures in the field of exchange rates may lead to an inappropriate policy conclusions. |
| first_indexed | 2025-11-15T06:57:24Z |
| format | Article |
| id | unimas-18638 |
| institution | Universiti Malaysia Sarawak |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T06:57:24Z |
| publishDate | 2003 |
| publisher | Taylor & Francis Group |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | unimas-186382017-11-17T07:49:20Z http://ir.unimas.my/id/eprint/18638/ The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies Liew, Venus Khim-Sen Chong, Terrence Tai-Leung Lim, Kian-Ping HB Economic Theory Utilizing the formal linearity test of Luukkonen, Saikkonen and Tera¨ svirta (Biometrika, 75, 491–99, 1998) as diagnostic tool, the empirical finding suggests that the linear autoregressive (AR) model is inadequate in describing the real exchange rates behaviour of 11 Asian economies. It is noted that the conventional battery of diagnostic tests is capable of identifying the inadequacy of the linear model in only three of these series. Moreover, the linearity nature of this behaviour has been formally rejected in favour of the non-linear smooth transition autoregressive (STAR) model. The finding of non-linearity in the data generating process of these real exchange rates warrants that the use of linear framework in empirical modelling and statistical testing procedures in the field of exchange rates may lead to an inappropriate policy conclusions. Taylor & Francis Group 2003 Article PeerReviewed text en http://ir.unimas.my/id/eprint/18638/7/The%20inadequacy%20of%20linear%20autoregressive%20model%20%28abstract%29.pdf Liew, Venus Khim-Sen and Chong, Terrence Tai-Leung and Lim, Kian-Ping (2003) The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies. Applied Economics, 35 (12). pp. 1387-1392. ISSN 0003-6846 http://dx.doi.org/10.1080/0003684032000129750 10.1080/0003684032000129750 |
| spellingShingle | HB Economic Theory Liew, Venus Khim-Sen Chong, Terrence Tai-Leung Lim, Kian-Ping The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies |
| title | The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies |
| title_full | The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies |
| title_fullStr | The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies |
| title_full_unstemmed | The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies |
| title_short | The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies |
| title_sort | inadequacy of linear autoregressive model for real exchange rates: empirical evidence from asian economies |
| topic | HB Economic Theory |
| url | http://ir.unimas.my/id/eprint/18638/ http://ir.unimas.my/id/eprint/18638/ http://ir.unimas.my/id/eprint/18638/ http://ir.unimas.my/id/eprint/18638/7/The%20inadequacy%20of%20linear%20autoregressive%20model%20%28abstract%29.pdf |