The Review of Economics and Statistics Vol. 72 No. 3 1990
Modelling the Coherence in Short-Run Nominal Exchange Rates: A Multivariate Generalized Arch Model
Abstract
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.
- DOI
- 10.2307/2109358
- Volume
- 72
- Issue
- 3
- Pages
- 498
- Sources
- crossref openalex