If we have to check the co movements/spill over effects between certain variable of Pakistan and 5 other countries, Is it possible by using a single GARCH model. If yes then WHAT will be the VARIANCE EQUATION?
OR WE HAVE TO study EACH country one by one against PAKISTAN AND KEEPING ALL OTHER countries IN VARIANCE EQUATION
Assume
basic model: A= Con + B+C+D+E+error. (refer to figure for detailed elaboration)
Use some multivariate GARCH model allowing spillover effect in volatility.
- Reviewed alot and tried alot. Could not get the strong support ao thats why asking here from experts. Multivariate GARCH did that but what about variance equation ??? Shoul it be blank with mean equation carryingvall variables! I dont think so. Need help again
Ms. Jyoti Kumari, I have added a sample figure to my question, If you can look into it so that I can get befit from your knowledge. M stuck right now. the variables are to be integrated , but my ultimate objective is to get pairwise movements/spill overs between the dependent and explanatory variables.
The simplest solution is to add squared lagged values of the other countries as exogenous variables in the GARCH equation of Pakistan. This is the simplest way you can test for spillover to Pakistan and excluding a-priori any reverse effect from Pakistan to other countries
There are many methods for estimating and testing volatility and co-volatility spillover effects.
Numerous innovative methods have been published in leading energy and engineering journals, such as Energy, Energies, Renewable and Sustainable Energy Reviews, and Sustainability, in the last two years.
Farshad Fathian Can you check, please. This might be the same as we discuss
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