TIME-SERIES MODEL WITH PERIODIC STOCHASTIC REGIME SWITCHING

Catherine Bac, Jean-MicheI Chevet and Eric Ghysels

Macroeconomic Dynamics, 2001, vol. 5, issue 1, 32-55

Abstract: This paper provides a historical chronology of economic activity in 16th- and 17th-century France that is based on wheat price series in Paris and Toulouse. A stochastic regime-switching model enables us to benchmark eras and summarize the salient features of a development difficult to appraise in all its complexity. A new class of Markov regime-switching time-series models is introduced to allow for nontrivial interdependencies between different types of cycles that make the economy grow at an unsteady rate. With a predominantly agricultural cycle, we uncover a strongly periodic Markov switching scheme for recorded wheat prices from the grain markets of Paris and Toulouse. Besides the periodic nature of the Markov chain, we also study whether a common factor determined the state of the economy in Paris and Toulouse or whether each series moved independently.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:5:y:2001:i:01:p:32-55_01

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