Scandinavian Working Papers in Economics

Working Papers,
Örebro University, School of Business

No 2020:2: Corona, Crisis and Conditional Heteroscedasticity

Tamás Kiss () and Pär Österholm ()
Additional contact information
Tamás Kiss: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Pär Österholm: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden

Abstract: In this paper, we illustrate the macroeconomic risk associated with the early stage of the corona-virus outbreak. Using monthly data ranging from July 1991 to March 2020 on a recently developed coincidence indicator of global output growth, we estimate an autoregressive model with GARCH effects and non-Gaussian disturbances. Our results indicate that i) accounting for conditional heteroscedasticity is important and ii) risk, measured as the volatility of the shocks to the process, is at a very high level – largely on par with that experienced around the financial crisis of 2008-2009.

Keywords: GARCH; Non-Gaussianity

JEL-codes: C22; E32; E37

9 pages, March 23, 2020

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