Source: Economic Research Forum
Author(s): Doaa Akl Ahmed, Mamdouh M. Abdelsalam
This paper aims at modelling the density of quarterly inflation based on time-varying conditional variance, skewness and kurtosis model developed by Leon, Rubio, and Serna (2005). They model higher-order moments as GARCH-type processes by applying a Gram-Charlier series expansion of the normal density function. We estimated seven univariate models, including GARCH-M and TARCH-M models, assuming three different distributions for the error term, namely: normal, student t, and GED distributions. Additionally, the model that allows for non-constant higher order moments, GARCHSK-M, has been estimated. Moreover, the paper utilizes two multivariate models, Dynamic Conditional Correlation (DCC) and Diagonal VECH models to isolate the time-varying conditional correlations between inflation and two financial variables, including growth in domestic credit and real exchange rate…
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