Estimate the garch-m model discuss the estimated results -

Question

Given the following;

y_t = 2.0 + 3.0x_t + 0.8√h_t + e_t (1)

x_t = 1.0 + 0.6x_t-1 + z_t (2)

h_t = 1.0 + 0.4e²_t-1 + 0.3h_t-1 (3)

e_t = v_t√h_t (4)

Using only RATS, generate data for the GARCH-M model (500 observations), where z_t and v_t are both iid. Save the generated y and x in a RATS data file (.rat) and open your data file.

Estimate the GARCH-M model. Discuss the estimated results

A project which has been fully completed will include the following 3 files; (1) The RATS input used to complete all of the above tasks, (2) RATS output file and (3) the saved data file (.RAT). Use the display command when discussing the results.

Attachment:- Project.rar