Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model.
A multivariate time series model with time varying conditional variances and covariances, but constant conditional correlations is proposed. In a multivariate regression framework, the model is readily interpreted as an extension of the Seemingly Unrelated Regression (SUR) model allowing for heteroskedasticity. Parameterizing each of the conditional variances as a univariate Generalized Autoregressive Conditional Heteroskedastic (GARCH) process, the descriptive validity of the model is illustrated for a set of five nominal European U.S. dollar exchange rates following the inception of the European Monetary System (EMS). When compared to the pre- EMS free float period, the comovements between the currenciess are found to be significantly higher over the later period. Copyright 1990 by MIT Press.
Year of publication: |
1990
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Authors: | Bollerslev, Tim |
Published in: |
The Review of Economics and Statistics. - MIT Press. - Vol. 72.1990, 3, p. 498-505
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Publisher: |
MIT Press |
Saved in:
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