GARCH inadequacy for modelling exchange rates: empirical evidence from Latin America
AbstractThis article checks for the adequacy of using GARCH models in exchange rate series. Using the Hinich portmanteau bicorrelation test, we find that a GARCH formulation or any of its variants fails to capture the data generating process of the main Latin American exchange rates. Our results highlight the potential of having misleading public policy when estimates are based in GARCH types of models. This article also complements recent similar findings encountered in European and Asian economies.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 39 (2007)
Issue (Month): 19 ()
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Web page: http://www.tandfonline.com/RAEC20
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- Wild, Phillip & Hinich, Melvin J. & Foster, John, 2010.
"Are daily and weekly load and spot price dynamics in Australia's National Electricity Market governed by episodic nonlinearity?,"
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- Arturo Lorenzo-Valdés & Antonio Ruiz-Porras, 2012. "Los rendimientos cambiarios latinoamericanos y la (a)simetría de los shocks informacionales: un análisis econométrico," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 87-113, November.
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