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The Appropriate Model and Dependence Measures of Thailand’s Exchange Rate and Malaysia’s Exchange Rate: Linear, Nonlinear and Copulas Approach

Author

Listed:
  • Pisit Leeahtam

    (Dean of Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand)

  • Chukiat Chaiboonsri

    (Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand)

  • Kanchana Chokethaworn

    (Assoc. Prof., Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand)

  • Prasert Chaitip

    (Assoc. Prof., Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand)

  • Songsak Sriboonchitta

    (Assoc. Prof., Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand)

Abstract

The objectives of this study are to find the fitting model and dependence measures of both Thailand’s exchange rate and Malaysia’s exchange rate during, between, and after the World’s recent financial crises based on linear, nonlinear and empirical copula approaches. The results of the study confirm that the nonlinear model (NNTs) is an appropriate model for Thailand’s exchange rate return in percentage during the periods of 2008-2011but not for Malaysia’s exchange rate return. Based on empirical copula approach, the dependence measures are very small between Thailand’s exchange and Malaysia’s exchange. This seems to suggest that when global economy is affected by World’s financial crisis, the nonlinear approach should be used to predict Thailand’s exchange rate return in percentage. In addition, it suggests that both the nonlinear and linear approaches should be used to predict the Malaysia’s exchange rate return in percentage. Moreover, the relationship between the exchange rate of Thailand and that of Malaysia is not strong. This is also true for the currencies of both countries.

Suggested Citation

  • Pisit Leeahtam & Chukiat Chaiboonsri & Kanchana Chokethaworn & Prasert Chaitip & Songsak Sriboonchitta, 2011. "The Appropriate Model and Dependence Measures of Thailand’s Exchange Rate and Malaysia’s Exchange Rate: Linear, Nonlinear and Copulas Approach," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(6), pages 1-14, October.
    • Handle: RePEc:spp:jkmeit:1206
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    References listed on IDEAS

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    1. Yan, Jun, 2007. "Enjoy the Joy of Copulas: With a Package copula," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 21(i04).
    2. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
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