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Do We Have Robust GARCH Models Under Different Mean Equations: Evidence from Exchange Rates of Thailand?

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Robustness in Econometrics

Part of the book series: Studies in Computational Intelligence ((SCI,volume 692))

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Abstract

This study investigates the exchange rate volatility of Thai baht using GARCH, TGARCH, EGARCH and PGARCH models and examines the robustness of these models under different mean equation specifications. The data consisted of monthly exchange rate of Thai baht with five currencies of leading trade partners during January 2002–March 2016. The results show that the GARCH model is well-fitted for Chinese yuan and US dollar exchange rate, while TGARCH model is suitable to be selected for Japanese yen, Malaysian ringgit and Singapore dollar. For the model sensitivity, the findings indicate that the GARCH model is robust for the cases of Chinese yuan and US dollar, while TGARCH model is robust only for Malaysian ringgit. Therefore, We conclude that the selection of GARCH models is sensitive to mean equation specification. This confirms that researchers should pay attention to mean equation specifications when it comes to volatility modelling.

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Notes

  1. 1.

    We use the model specification given by Asteriou and Hall [4], which is also known as the GJR model [14]. The original TGARCH model was introduced by Zakoian [30], and it considers conditional standard deviation instead of conditional variance.

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Acknowledgements

The authors would like to thank the anonymous reviewer for suggestions which have improved the quality of this paper. This research is supported by Puay Ungpakoyn Centre of Excellence in Econometrics, Faculty of Economics, Chiang Mai University.

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Authors and Affiliations

  1. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Tanaporn Tungtrakul, Natthaphat Kingnetr & Songsak Sriboonchitta

Authors
  1. Tanaporn Tungtrakul
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  2. Natthaphat Kingnetr
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  3. Songsak Sriboonchitta
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Corresponding author

Correspondence to Tanaporn Tungtrakul .

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Editors and Affiliations

  1. Department of Computer Science, University of Texas at El Paso Department of Computer Science, El Paso, TX, USA

    Vladik Kreinovich

  2. Faculty of Economics, Chiang Mai University Faculty of Economics, Chiang Mai, Thailand

    Songsak Sriboonchitta

  3. Japan Adv. Inst. of Sci. & Tech. (JAIST) , Ishikawa, Japan

    Van-Nam Huynh

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Tungtrakul, T., Kingnetr, N., Sriboonchitta, S. (2017). Do We Have Robust GARCH Models Under Different Mean Equations: Evidence from Exchange Rates of Thailand?. In: Kreinovich, V., Sriboonchitta, S., Huynh, VN. (eds) Robustness in Econometrics. Studies in Computational Intelligence, vol 692. Springer, Cham. https://doi.org/10.1007/978-3-319-50742-2_37

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  • DOI: https://doi.org/10.1007/978-3-319-50742-2_37

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