Beta Autoregressive Transition Markov-Switching Models for Business Cycle Analysis

Monica Billio () and Roberto Casarin ()

Studies in Nonlinear Dynamics & Econometrics, 2011, vol. 15, issue 4, pages 2

Abstract:

We propose a new class of Markov-switching models useful for business cycle analysis, with transition probabilities following independent beta autoregressive processes. We study the effects of the autoregressive dynamics on the regime duration. We propose a full Bayesian inference approach and particular attention is paid to the parameters of the latent beta autoregressive processes. We discuss the choice of the prior distributions and propose a Markov-chain Monte Carlo algorithm for estimating both the parameters and the latent variables. Finally, we provide an application to the Euro area business cycle.

Keywords: Markov-switching model; beta autoregressive process; Bayesian inference; Markov-chain Monte Carlo (search for similar items in EconPapers)
JEL-codes: C11 C15 C22 E32 (search for similar items in EconPapers)
Date: 2011
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