Buffered autoregressive models with conditional heteroscedasticity: An application to exchange rates

Ke Zhu (mazhuke@hku.hk), Wai Keung Li and Philip L.H. Yu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper introduces a new model called the buffered autoregressive model with generalized autoregressive conditional heteroskedasticity (BAR-GARCH). The proposed model, as an extension of the BAR model in Li et al. (2013), can capture the buffering phenomenon of time series in both conditional mean and conditional variance. Thus, it provides us a new way to study the nonlinearity of a time series. Compared with the existing AR-GARCH and threshold AR-GARCH models, an application to several exchange rates highlights an interesting interpretation of the buffer zone determined by the fitted BAR-GARCH models.

Keywords: Buffered AR model; Buffered AR-GARCH model; Exchange rate; GARCH model; Nonlinear time series; Threshold AR model. (search for similar items in EconPapers)
JEL-codes: C1 C51 C52 C58 G1 (search for similar items in EconPapers)
Date: 2014-02-22
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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Citations: View citations in EconPapers (1)

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