Specification Testing of Markov Switching Models*

Testing for linearity in Markov switching models: a bootstrap approach

Testing for linearity in the context of Markov switching models is complicated because standard regularity conditions for likelihood based inference are violated. This is due to the fact that, under the null hypothesis of linearity, some parameters are not identified and scores are identically zero. Thus the asymptotic distribution of the test statistic of interest does not possess the standard...

Markov-Switching Models

Moments of Markov switching models

This paper derives the moments for a range of Markov switching models. We characterize in detail the patterns of volatility, skewness and kurtosis that these models can produce as a function of the transition probabilities and parameters of the underlying state densities entering the switching process. The autocovariance of the level and squares of time series generated by Markov switching proc...

Asymmetric Effects of Monetary Policy and Business Cycles in Iran using Markov-switching Models

This paper investigates the asymmetric effects of monetary policy on economic growth over business cycles in Iran. Estimating the models using the Hamilton (1989) Markov-switching model and by employing the data for 1960-2012, the results well identify two regimes characterized as expansion and recession. Moreover, the results show that an expansionary monetary policy has a positive and statist...

Markov-switching generalized additive models

We consider Markov-switching regression models, i.e. models for time series regression analyses where the functional relationship between covariates and response is subject to regime switching controlled by an unobservable Markov chain. Building on the powerful hidden Markov model machinery and the methods for penalized B-splines routinely used in regression analyses, we develop a framework for...