GSTAR-SUR Modeling with Calendar Variations and Intervention to Forecast Outflow of Currencies in Java Indonesia

Abstract

Ordinary Least Squares (OLS) is general method to estimates Generalized Space Time Autoregressive (GSTAR) parameters. But in some cases, the residuals of GSTAR are correlated between location. If OLS is applied to this case, then the estimators are inefficient. Generalized Least Squares (GLS) is a method used in Seemingly Unrelated Regression (SUR) model. This method estimated parameters of some models with residuals between equations are correlated. Simulation study shows that GSTAR with GLS method for estimating parameters (GSTAR-SUR) is more efficient than GSTAR-OLS method. The purpose of this research is to apply GSTAR-SUR with calendar variation and intervention as exogenous variable (GSTARX-SUR) for forecast outflow of currency in Java, Indonesia. As a result, GSTARX-SUR provides better performance than GSTARX-OLS.