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Too many skew normal distributions? The practitioner’s perspective

Author

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  • Wojciech Charemza
  • Carlos Diaz Vela
  • Svetlana Makarova

Abstract

The paper tackles the issue of possible misspecification in fitting skew normal distributions to empirical data. It is shown, through numerical experiments, that it is easy to choose a distribution which is different from this which actually generated the sample, if the minimum distance criterion is used. It is suggested that, in case of similar values of distance measures obtained for different distributions, the choice should be made on the grounds of parameters’ interpretation rather than the goodness of fit. This is supported by empirical evidence of fitting different skew normal distributions to the estimated monthly inflation uncertainties for Belarus, Poland, Russia and Ukraine.

Suggested Citation

  • Wojciech Charemza & Carlos Diaz Vela & Svetlana Makarova, 2013. "Too many skew normal distributions? The practitioner’s perspective," Discussion Papers in Economics 13/07, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:13/07
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    References listed on IDEAS

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    Cited by:

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    2. Lee, Seohyun, 2017. "Three essays on uncertainty: real and financial effects of uncertainty shocks," MPRA Paper 83617, University Library of Munich, Germany.
    3. Ralph Vince, 2023. "Expectation and Optimal Allocations in Existential Contests of Finite, Heavy-Tail-Distributed Outcomes," Mathematics, MDPI, vol. 12(1), pages 1-25, December.
    4. Christophe Ley, 2014. "Flexible Modelling in Statistics: Past, present and Future," Working Papers ECARES ECARES 2014-42, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    skew normal distribution; simulated minimum distance estimators; inflation uncertainties; monetary policy in Eastern Europe;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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