Korean Currency Crisis and Regime Change:A Multivariate GARCH Model with Bayesian Approach |
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| Authors: | Suduk Kim Hiroki Tsurumi |
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| Institution: | (1) Department of Economics, Hoseo University, Asan Si, ChungNam, Korea, 336-795;(2) Department of Economics, Rutgers University, New Brunswick, NJ, 08901-1248 |
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| Abstract: | Regarding the question of when the Korean currency crisis actually started,several financial time series areexamined in a multivariate time series framework with the GeneralizedAutoregressive Conditional Heteroskedastic (GARCH) process.The likelihood ratio (LR) test is used to find a structural break with aselection of breakpoints.The posterior probability function of a breakpoint is also derived.Individual time series data show the existence of several breaks since July1997.A statistically significant structural break using the multivariate GARCHmodelwas found prior to 8 November 1997, the date when the domestic currencystarted to massively devalue. |
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| Keywords: | GARCH Bayesian approach regime change Laplace approximation |
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