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Testing Markov switching models

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  • Yu-Lieh Huang

Abstract

In this article, we propose a new test for Markov switching models. Unlike the tests in the existing literature (e.g. Hansen, 1992; Garcia, 1998; Cho and White, 2007), we focus on testing the null of two regimes, instead of one single regime, in a switching framework. To implement our test, we propose a Markov switching model with absorbing states and examine whether the absorption probabilities are close to the boundary of the parameter space. We exploit recent advances by Andrews (2001) and conduct inference in the proposed model.

Suggested Citation

  • Yu-Lieh Huang, 2014. "Testing Markov switching models," Applied Economics, Taylor & Francis Journals, vol. 46(17), pages 2047-2051, June.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:17:p:2047-2051
    DOI: 10.1080/00036846.2014.892201
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    Cited by:

    1. Maddalena Cavicchioli, 2015. "Likelihood Ratio Test and Information Criteria for Markov Switching Var Models: An Application to the Italian Macroeconomy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(3), pages 315-332, November.

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