Re: [Gretl-users] GARCH modeling.
On Thu, 31 Mar 2011, Mike Estrada wrote:
I'm a new user of gretl and fairly new to econometrics in general
so please
try not to be too technical. I am using gretl to do some GARCH(1,1)
modeling for a data verification project with my Master's Thesis. I have a
set of Euro-Dollar exchange data that I am trying out the GARCH modeling on
to get to know the software. My problem is that when I attempt to do this,
I get an error that reads "Convergence criteria not met" and I have no idea
what this means.
Gretl can't find a well-defined maximum for the likelihood within
the admissable parameter space.
One point to note is that series to be analysed via GARCH should
have a constant conditional mean -- they shouldn't be trending,
after controlling for any included regressors. With exchange
rates, which are likely to trend based on differential inflation
rates, one would either include variables that account for the
trend or perhaps run the analysis in first-differences of logs.
Allin Cottrell