Vilasuso, Jon: The Persistence of Exchange Rate Volatility
World Conference Econometric Society, 2000, Seattle

Jon Vilasuso, West Virginia University
The Persistence of Exchange Rate Volatility
Session: C-2-8  Saturday 12 August 2000  by Vilasuso, Jon
This paper empirically examines the persistence of exchange rate volatility using a fractionally integrated GARCH model. Our findings suggest that the fractionally integrated GARCH model is better able to capture the salient features of exchange rate volatility than either a GARCH or an integrated GARCH model. In addition, we find that differences in the dynamic properties of alternative conditional heteroskedastic models are important in practice. Specifically, the description of volatility based on alternative conditional heteroskedastic models differs widely and affects volatility forecast accuracy, currency option pricing, and the correlation between international stock market returns.

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