We consider the problem of forecasting a stationary time series when there is an unknown mean break close to the forecast origin. Based on the intercept-correction methods suggested by Clements and Hendry (1998) and Bewley (2003), a hybrid approach is introduced, where the break and break point...

The idea of identifying structural parameters via heteroskedasticity is explored in the context of binary choice models with an endogenous regressor. Sufficient conditions for parameter identification are derived for probit models without relying on instruments or additional restrictions. The...

Detecting contagion during financial crises requires demarcation of crisis periods. This paper presents a method for endogeneous dating of both the start and finish of crises, coupled with the statistical detection of contagion effects. We couple smooth transition functions with structural GARCH...

type="main" xml:id="twec12089-abs-0001" <title type="main">Abstract</title> <p>This study examines how the volatility and liquidity of 10 Asian exchange rates against the US dollar change with volatilities in commodity price and carry trade over the period of January 2000 to June 2010. We find that uncertainties in commodity...</p>

We consider three approaches to determine the lag length of a stationary vector autoregression model and the presence of a mean break. The first approach, commonly used in practice, uses a break test as a specification check after the lag length is selected by an information criterion. The...

The properties and applications of the normal log-normal (NLN) mixture are considered. The moment of the NLN mixture is shown to be finite for any positive order. The expectations of exponential functions of a NLN mixture variable are also investigated. The kurtosis and skewness of the NLN...

We examine the presence or absence of asymmetric volatility in the exchange rates of Australian dollar (AUD), Euro (EUR), British pound (GBP) and Japanese yen (JPY), all against US dollar. Our investigation is based on a variant of the heterogeneous autoregressive realized volatility model,...

System tests for cointegration proposed by Stock and Watson (1988), Johansen (1988), and Bewley and Yang (1995) are compared using Monte Carlo experiments that include overspecification of the lag length and data-generating processes with moving average disturbances. Both AIC and SIC are used to...

The normal log-normal mixture (NLNM) is considered for modelling leptokurtosis and skewness. The moment of the mixture is shown to be finite for any positive order. The expectations of exponential functions of the NLNM variable are also investigated. The kurtosis and skewness of the NLNM are...