International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss


Modeling the Structural Shifts in Real Exchange Rate with Cubic Spline Regression (CSR). Turkey 1987-2008

Economic life is continuous but time series presenting economic data contain some break points because of sharp changes and shifts because of important shocks such as economic crises. In such cases many important structural shifts occur in some parameters of economic models. These shifts on economic parameters generally may differ and occur with different time lags. In this study it is aimed to expose and analyze the occurrence of structural shifts and structural changes in Real Exchange Rate in Turkey during the period of 1987-2008. We used cubic spline regression in modeling the structural changes in real exchange rate in Turkey. With this technique, several cubic spline regression models of real exchange rate are constructed and discussed, and the most significant one is chosen. Then in this study, we also tried to put forward how prediction sum of squares statistic residuals can improve the analysis in cubic spline models.

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