| Abstract: | The conditional heteroscedastic models (CHM) are commonly used to describe the dynamics of nominal exchange rates. However, some investigations have already pointed out that the CHMs are not able to fully explain all non-linearities exhibited by the exchange rate series. This paper analyses the performance of univariate CHMs in modelling the non-linearities of nominal exchange rate series vis-à-vis the US dollar. Twelve currencies are examined on a weekly basis: The Belgian, Swiss and French francs; the Canadian dollar; the German mark; the Danish and Norwegian kroners; the British and Irish pounds; the Italian lira; the Japanese yen and the Dutch guilder. The CHMs captured in a satisfactory way the volatility clustering of the series and show volatility peaks in historically nervous periods of the international market. Moreover, the results of the BDS tests for whiteness applied to the standardized residuals show the good specification of the models. Copyright © 1998 John Wiley & Sons, Ltd. |
