Change in Regime and Markov Models

Anders Rygh Swensen ()
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Anders Rygh Swensen: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: In this paper we point out that using a two-state Markov chain to describe change in regime makes it difficult to interpret the model since there is a bias towards frequent shifts. However, by using a finite Markov chain with a transition matrix satisfying certain restrictions it is possible to circumvent the difficulty and at the same time use the established procedures for estimation and filtering. The methods are applied to a couple of time series from the Norwegian quarterly national accounts.

Keywords: Change in regime; Markov-switching models; alternating renewal processes (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Date: 1997-11
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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:204

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