Abstract

CABALLERO MARTINEZ, Rolando  and  CABALLERO CLAURE, Benigno. Estimation of Volatility of the Rate of Exchange in Mexico and Brazil. An Approach with Markov Switching Garch Models. rlde [online]. 2016, n.25, pp.127-170. ISSN 2074-4706.

This paper analyzes the evolution of exchange rate volatility in Mexico and Brasil in the period 1992:01-2013:12 and presents evidence that it tends to decrease over time. We also discuss the relationship between exchange rate volatility and depreciation. Our findings indicate that further depreciation change temporally precedes greater exchange rate volatility. Also to analyze these effects models conditional heteroskedasticity (ARCH-M, GARCH-M, TGARCH-M, EGARCH-M and PARCH-M) was used. The results of our study show that once the volatility is in a regime is very low probability of passing to another regime immediately. Another important finding is the high persistence in volatility in both economies, confirming that shocks it cannot dissipate quickly.

Keywords : Stochastic Volatility; Financial Econometrics; EGARCH-M.

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