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st: Macroeconomic Uncertainty using GARCH(1,1)

From   Kamyar Baradaran <[email protected]>
To   [email protected]
Subject   st: Macroeconomic Uncertainty using GARCH(1,1)
Date   Thu, 14 Jan 2010 18:26:33 +0100

Dear All,

I am trying to build a measure for macroeconomic uncertainty for each
country in the world from 1980-2009. I came across this in an article:

Serven, L. (1998). "Macroeconomic Uncertainty and Private Investment
in Developing Countries." Policy Research Working Paper. which you can
which you can find here (PAGE 9-10):

An also:
Garcia-Canal, E. and M. F. Guillen (2008). "Risk and the strategy of
foreign location choice in regulated industries." Strategic Management
Journal 29(10): 1097-1115.
which you can find here (PAGE 1104-1105):

In the later is written:
"First, we calculated macroeconomic uncertainty following Serven's
(1998) methodology for measuring unexpected changes in the rate of
growth of the economy, calculated as the natural logarithm of the
conditional variance of nominal GDP growth in a given year fitted by
using the information on GDP growth until that year, which is known to
executives at companies. According to this measure, Nicaragua had the
highest level of macroeconomic uncertainty, 3.57 in 1990, compared to
-0.28 for Chile in the same year (the sample mean is 0.06 and the
standard deviation 0.87)"

Could someone explain to me how to do what they did in STATA? They
used GARCH(1,1), but I can not make sense of it.

Thanks a lot.
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