Hi,
I am trying to find the conditional variance for multiple countries' HP filter ln of GDP using the following model:
Yit = ci + ε
where εit ~ N(0,hit)
hit = wi +αε2it-1 + βhit-1
Where Y is the lnGDP, c is a constant and h is the conditional variance.
Currently, my command used is: 'arch austria, arch(1/1) garch(1/1)' where Y=austria in this example.
I am unsure whether the GARCH models the conditional variance as stated in the third equation or whether I am supposed to specify this equation myself. I would greatly appreciate if someone could clarify this, I am basing my research off this paper which provides more detail if anything was unclear in my post
http://ec.europa.eu/economy_finance/.../ecp402_en.pdf
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