Estimating an ARCH model

[mvm20]

Hey all,

I am having trouble running an ARCH model, I would like to model a fisher relation except I want to add an extra term, the conditional variance of inflation.
If my model is then interest = c + inflation + var(inflation) how do I model var(inflation) before I put it in the equation?
Thank you in advance, I am having trouble and any tips or help would be much appreciated.

Cheers.

[trubador]

This is an example of garch-in-mean model. Open the "Equation Estimation" window and select ARCH as the estimation method. You'll see an "ARCH-M" option to the right of the "Mean Equation" dialog box. Simply select the "Variance" option from the drop-down list. I suggest you to try other specifications as well and see which one fits the best.

[mvm20]

Thank you trubador,

When I run this model and extract the arch terms by using "proc->make GARCH variance series", what is the difference between selecting variance in "arch-m" and not selecting anything at all?
Sorry I am rather new to econometrics.
Also in the mean equation window should I put the interest rate and its lags, or just interest = c + inflation? Because the latter says near singular matrix. And one more thing, does anything need to be put in the variance regressors box?

Thank you very much for your help.