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Impulse Response Function for Conditional Volatility in GARCH Models

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  • Lin, Wen-Ling
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    Abstract

    This paper defines and analyzes the impulse response function for conditional volatility in GARCH models. It first derives the function from a vector autoregressive and moving average representation of the GARCH models and obtains the corresponding standard errors from the first-order derivatives of the function and the covariance matrix of the estimated parameters. The paper then employs a Monte Carlo study to assess the finite sample properties of the standard errors and provides an empirical example of the dependence of exchange rate volatility to demonstrate its use in empirical applications.

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    Bibliographic Info

    Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

    Volume (Year): 15 (1997)
    Issue (Month): 1 (January)
    Pages: 15-25

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    Handle: RePEc:bes:jnlbes:v:15:y:1997:i:1:p:15-25

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    Cited by:
    1. Helena Chulia & Francisco Climent & Pilar Soriano & Hipolit Torro, 2009. "Volatility transmission patterns and terrorist attacks," Quantitative Finance, Taylor & Francis Journals, vol. 9(5), pages 607-619.
    2. Mardi Dungey & George Milunovich & Susan Thorp, 2008. "Unobservable Shocks as Carriers of Contagion: A Dynamic Analysis Using Identified Structural GARCH," NCER Working Paper Series 22, National Centre for Econometric Research.
    3. Menelaos Karanasos, . "The Covariance Structure of Component and Multivariate Garch Models," Discussion Papers 99/12, Department of Economics, University of York.
    4. Vicente Meneu & Hipolit Torro, . "Asymmetric covariance in sport-future markets," Studies on the Spanish Economy 135, FEDEA.
    5. Menelaos Karanasos, . "Some Exact Formulae for the Constant Correlation and Diagonal M - Garch Models," Discussion Papers 00/14, Department of Economics, University of York.
    6. Park JiYoung & Gordon Peter & Jun Eunha & Moore James E & Richardson Harry W., 2009. "Identifying the Regional Economic Impacts of 9/11," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 15(2), pages 1-34, July.
    7. Pascual-Fuster, Bartolome & Perez-Rodriguez, Jorge V., 2007. "Volatility transmission for cross-listed firms and the role of international exposure," Japan and the World Economy, Elsevier, vol. 19(3), pages 303-328, August.
    8. Vilasuso, Jon, 2001. "Causality tests and conditional heteroskedasticity: : Monte Carlo evidence," Journal of Econometrics, Elsevier, vol. 101(1), pages 25-35, March.
    9. Jonathan B. Hill, 2004. "Strong Orthogonal Decompositions and Nonlinear Impulse Response Functions for Infinite-Variance Processes," Working Papers 0408, Florida International University, Department of Economics.
    10. Le Pen, Yannick & Sévi, Benoît, 2010. "Volatility transmission and volatility impulse response functions in European electricity forward markets," Energy Economics, Elsevier, vol. 32(4), pages 758-770, July.
    11. Le Pen, Yannick & Sévi, Benoît, 2009. "News and correlations: an impulse response analysis," Economics Papers from University Paris Dauphine 123456789/6804, Paris Dauphine University.
    12. HAFNER, Christian & HERWARTZ, Helmut, 2001. "Volatility impulse response functions for multivariate GARCH models," CORE Discussion Papers 2001039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Miralles Marcelo, Jose Luis & Quiros, Jose Luis Miralles & Quiros, Maria del Mar Miralles, 2008. "Asymmetric variance and spillover effects: Regime shifts in the Spanish stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 1-15, February.
    14. Lee, Jim, 2002. "Federal funds rate target changes and interest rate volatility," Journal of Economics and Business, Elsevier, vol. 54(2), pages 159-191.
    15. Jin, Xiaoye & Xiaowen Lin, Sharon & Tamvakis, Michael, 2012. "Volatility transmission and volatility impulse response functions in crude oil markets," Energy Economics, Elsevier, vol. 34(6), pages 2125-2134.
    16. Jorge Pérez-Rodríguez, 2006. "The Euro and Other Major Currencies Floating Against the U.S. Dollar," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(4), pages 367-384, December.
    17. Dungey, Mardi & Milunovich, George & Thorp, Susan, 2010. "Unobservable shocks as carriers of contagion," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 1008-1021, May.
    18. Hafner, Christian M. & Herwartz, Helmut, 2006. "Volatility impulse responses for multivariate GARCH models: An exchange rate illustration," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 719-740, August.
    19. repec:wop:ubisop:0013 is not listed on IDEAS
    20. Francis Vitek, 2002. "An Empirical Analysis of Dynamic Interrelationships Among Inflation, Inflation Uncertainty, Relative Price Dispersion, and Output Growth," Working Papers 02-39, Bank of Canada.

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