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Some New Approaches to Formulate and Estimate Friction-Bernoulli Jump Diffusion and Friction-GARCH

Chihwa Kao ()

No 35, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: In this paper we propose a friction model with a Beroulli jump diffusion and a friction with GARCH to examine the exchange rates movements in Taiwan. The proposed model resolves the estimation problem associated with the stepwise movements of observed exchange rates. The specification maintains the desirable economic properties associated with movements in exchange rate returns and is empirically tractable. The AIC apparently favors the model based on Friction-GARCH model.

JEL-codes: C22 C31 (search for similar items in EconPapers)
Date: 2001-02
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:35

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