Claudio A. Bonilla (Corresponding author)  Faculty of Economics and Business  Department of Management and Finance  University of Chile

Rafael Romero-Meza  Faculty of Economics and Business  Department of Management and Finance  University of Chile

Melvin J. Hinich   Applied Research Laboratories  The University of Texas at Austin  P. O. Box 8029, Austin Texas, USA

WORKING PAPER  UNIVERSIDAD DE CHILE  FACULTAD DE ECONOMIA Y NEGOCIOS    SEPTEMBER 2005

This  paper  checks  for  the  adequacy  of  using  GARCH  models  in  exchange rate series. Using the Hinich portmanteau bicorrelation test,  we find that a GARCH formulation or any of its variants fails to capture  the data generating process of the main Latin American exchange rates.  Our results highlight the potential of having misleading public policy  when estimates are based in GARCH types of models. This paper also  complements recent similar findings encountered in European and Asian  economies.  Bajar pdf