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2002 | 5 | 25--36
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Multivariate ARCH - Type Models : A Bayesian Comparison

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In this paper we model two exchange rates that were most important for the Polish economy for many years, i.e. the zloty (PLN) values of the US dollar and the German mark. We make a Bayesian comparison of various bivariate ARCH-type specifications through their Bayes factors. By restricting it to only bivariate time series, it is possible to estimate even unparsimoniously parameterised models. Apart from the dimension of the parameter space, we consider the following aspects of empirical ARCH-type specifications: the ARCH(1) structure versus GARCH(1,1), free conditional covariances versus constant conditional covariances or correlations, conditional Normality versus thicker tails, and direct ARCH versus unobserved or latent factor ARCH models. In view of a high dimensionality of the parameter spaces and non-standard forms of the posterior densities, we use Markov chain Monte Carlo (MCMC) methods, mainly the Metropolis-Hastings algorithm, to simulate from the posterior distributions.(fragment of text)
Opis fizyczny
  • Cracow University of Economics, Poland
  • Cracow University of Economics, Poland
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