Long Memory with Markov-Switching GARCH
14 Pages Posted: 19 Feb 2008
Date Written: February 2008
The paper considers the Markov-Switching GARCH(1,1)-model with time-varying transition probabilities. It derives sufficient conditions for the square of the process to display long memory and provides some additional intuition for the empirical observation that estimated GARCH-parameters often sum to almost one.
Keywords: Markov switching, GARCH, long memory
JEL Classification: C13, C22
Suggested Citation: Suggested Citation