Corona, crisis and conditional heteroscedasticity

Tamas Kiss and Pär Österholm

Applied Economics Letters, 2021, vol. 28, issue 9, 755-759

Abstract: In this paper, we illustrate the macroeconomic risk associated with the early stage of the corona-virus outbreak. Using monthly data ranging from July 1991 to March 2020 on a recently developed coincidence indicator of global output growth, we estimate an autoregressive model with GARCH effects and non-Gaussian disturbances. Our results indicate that i) accounting for conditional heteroscedasticity is important and ii) risk, measured as the volatility of the shocks to the process, is at a very high level – largely on par with that experienced around the financial crisis of 2008–2009.

Date: 2021
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Working Paper: Corona, Crisis and Conditional Heteroscedasticity (2020)
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DOI: 10.1080/13504851.2020.1776829

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