Arbeitspapier

A functional approach to test trending volatility

In this paper we extend the traditional GARCH(1,1) model by including a functional trend term in the conditional volatility of a time series. We derive the main properties of the model and apply it to all agricultural commodities in the Mexican CPI basket, as well as to the international prices of maize, wheat, pork, poultry and beef products for three different time periods that implied changes in price regulations and behavior. The proposed model seems to adequately fit the volatility process and, according to homoscedasticity tests, outperforms the ARCH(1) and GARCH(1,1) models, some of the most popular approaches used in the literature to analyze price volatility. Keywords: Agricultural prices, volatility, GARCH models.

Language
Englisch

Bibliographic citation
Series: Working Papers ; No. 2016-04

Classification
Wirtschaft
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Model Construction and Estimation
Price Level; Inflation; Deflation
Agricultural Policy; Food Policy
Subject
Agricultural prices
volatility
GARCH models

Event
Geistige Schöpfung
(who)
Guerrero Escobar, Santiago
Hernández del Valle, Gerardo
Juárez Torres, Miriam
Event
Veröffentlichung
(who)
Banco de México
(where)
Ciudad de México
(when)
2016

Handle
Last update
10.03.2025, 11:44 AM CET

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Object type

  • Arbeitspapier

Associated

  • Guerrero Escobar, Santiago
  • Hernández del Valle, Gerardo
  • Juárez Torres, Miriam
  • Banco de México

Time of origin

  • 2016

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