Bayesian Estimation of ARMA-GARCH Model of Weekly Foreign Exchange Rates |
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| Authors: | Teruo Nakatsuma Hiroki Tsurumi |
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| Affiliation: | (1) Institute of Economic Research, Hitotsubashi University, Kunitachi, Tokyo, Japan;(2) Department of Economics, Rutgers University, New Brunswick, N.J., U.S.A. |
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| Abstract: | Three Bayesian methods (Markov chain Monte Carlo, Laplace approximation and quadrature formula) are developed to estimate the parameters of the ARMA-GARCH model. The ARMA-GARCH model is applied to weekly foreign exchange rate data of five major currencies, and their stochastic volatilities are judged by the posterior probabilities of stationarity and other conditions. This revised version was published online in August 2006 with corrections to the Cover Date. |
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| Keywords: | GARCH foreign exchange rate Bayesian inference |
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