Moreover, they stated that during the rise or fall of the output growth, volatility might respond differently to shock. Positive shocks create lower volatility than negative shocks of the same magnitude, and vice versa. The results from the GARCH models might show model misspecifications. “Neglecting in the nonstationarity of the unconditional variance can generate spuriously measured persistence of the conditional variance heavily biased towards one.
Thus, the high volatility persistence found in the GARCH models may prove spurious, since we do not incorporate structural change in the variance. Not considering changes in the mean growth rate because of kurtosis as outlier, structural breaks in mean, or structural breaks in the variance of the growth rate may leave the excess kurtosis unresolved” (WenShaw Fang and Miller 2009). For example, Henry and Olekans (2002) in the case of U.S. did not consider structural breaks in the volatility as well. As a solution, WenShaw Fang and Miller suggested that outlier model and changes in the mean variance equations can resolve it. It is worth mentioning, that re-examined studies show that every research can be remodelled. Based on previous work, later study can be more precise and detailed (as Speight got by re-examining CM, 1999 and WenShaw Fang and Miller by re-examining Japan’s case in 2010). This study will not re-examine Japan’s case but it will be based on the same approach.
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