A Markov-switching model with component structure for US GNP

Jurgen Doornik

Economics Letters, 2013, vol. 118, issue 2, 265-268

Abstract: The two-regime Markov-switching model that James Hamilton estimated for US real GNP up to 1984 does not survive extension of the data set. To allow for the ‘Great Moderation’ we require a mean and variance regime that evolve separately. The Markov-switching component model is proposed as a way to avoid estimating a fragile four-regime model. The resulting model captures business cycles and structural change in the variance well.

Keywords: Business cycles; Great moderation; Markov-switching models; US GNP (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:118:y:2013:i:2:p:265-268

DOI: 10.1016/j.econlet.2012.10.035

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