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This article proposes a Full Jump Switching Level Generalized Autoregressive Conditional Heteroscedasticity (GARCH) (i.e. FJSLG) model for short-term interest rate which is an extension of Lee's jump switching filter with a state-dependent time-varying jump dynamic. FJSLG is applied to the rates of US and Singapore Treasury bills with 3 months to maturity. Results of Diebold, Mariano and West (DMW) test with adjusted McCracken's critical value show the predictive superiority of FJSLG over its nested model, illustrating the importance of modelling simultaneously the effects of level, GARCH, regime switching and time-varying conditional jump for the short-rate dynamic.
