GARCH-Based Identification and Estimation of Triangular Systems

19 Pages Posted: 5 Sep 2008 Last revised: 22 May 2011

Date Written: May 20, 2010

Abstract

The diagonal GARCH(1,1) model is shown to support identification of the triangular system and is argued as a second moment analog to traditional exclusion restrictions. Estimators for this result include QML and GMM. The GMM estimator contains many (potential weak) moment conditions that can be the source of bias. As a result, a jackknife GMM estimator is proposed that remains consistent in the presence of many such moments. A small Monte Carlo study of the GMM and jackknife GMM estimators is also included.

Keywords: Triangular models, heteroskedasticity, identification.

JEL Classification: C3, C13, C32

Suggested Citation

Prono, Todd, GARCH-Based Identification and Estimation of Triangular Systems (May 20, 2010). FRB of Boston Quantitative Analysis Unit Working. Available at SSRN: https://ssrn.com/abstract=1259373 or http://dx.doi.org/10.2139/ssrn.1259373

Todd Prono (Contact Author)

Federal Reserve Board ( email )

20th and Constitution Ave NW
Washington, DC 20551
United States

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