Modeling and forecasting exchange rate volatility in Bangladesh using GARCH models: a comparison based on normal and Student’s t-error distribution

Financial Innovation

Table 1 Estimation of different conditional mean models and testing for ARCH effect

Variables	Coefficients
Variables	(1)	(2)	(3)
Dependent Variable, r _t
μ	0.007039*	0.002324***	0.00200
μ	(0.001770)	(0.001325)	(0.001315)
r _t − 1		0.670082*	0.577656*
r _t − 1		(0.017550)	(0.023430)
r _t − 2			0.137930*
r _t − 2			(0.023430)
ARCH Effect (Dependent Variable, \( {\varepsilon}_t^2 \))
Constant	0.001824**	0.001964*	0.001852*
Constant	(0.000779)	(0.000417)	(0.000419)
\( {\varepsilon}_{t-1}^2 \)	0.677218*	0.369592*	0.394310*
\( {\varepsilon}_{t-1}^2 \)	(0.017396)	(0.021975)	(0.021739)
HO: No ARCH Effect
F- Statistic	1515.543*	282.8792*	328.9958*
Probability	0.000000	0.000000	0.000000

Standard Errors are in Parenthesis. *** indicates significant at 10% level, ** significant at 5% level and * indicates that at 1% level