Classical Estimation of Multivariate Markov-Switching Models using MSVARlib

Benoit Bellone ()

Econometrics from EconWPA

Abstract: This paper introduces an upgraded version of MSVARlib, a Gauss and Ox- Gauss compliant library, focusing on Multivariate Markov Switching Regressions in their most general specification. This new set of procedures allows to estimate, through classical optimization methods, models belonging to the MSI(M)(AH)-VARX ``intercept regime dependent'' family. This research enhances the first package MSVARlib 1.1, which has been deeply inspired by the works of Hamilton and Krolzig. Not to mention the extension to a generalized multivariate regression framework, it notably augments the range of models with a possibly unlimited finite number of Markov states, offers automatic or manual intialization procedures and adds new statistical tests. The first part of this article provides the basic theoretical grounds of the related Markov-switching models. Following sections give some illustrations of the programs through univariate and multivariate examples. One is based on a non-linear reading of the american unemployment rate. A second study is focused on coincident stochastic models of US recessions and slowdowns. The paper concludes on possible extensions and new applications. Detailed guidelines in appendices and tutorial programs are provided to help the reader handling the Gauss package and the joined replication files.

Keywords: Multivariate Markov-Switching Regressions; Hidden markov Models; Non linear regressions; Open source Gauss library; Business cycle; EM algorithm; Kittagawa-Hamilton Filtering; Recession Detection Models; MSVAR; MS-VAR; Hamilton's Model; Krolzig MSVAR library; Filtered probabilities; Smoothed probabilities. (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets and nep-mac
Date: 2005-08-19
Note: Type of Document - pdf; pages: 27. Gauss programs, compatible with 3.2 Versions or upper. A complete Gauss library to estimate MSVAR models or Markov switching regressions. Codes, data and programs available at http://bellone.ensae.net
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:0508017

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