Working Paper

Long Memory with Markov-Switching GARCH

Walter Kraemer
CESifo, Munich, 2008

CESifo Working Paper No. 2225

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