Duration Dependent Markov-Switching Vector Autoregression: Properties, Bayesian Inference, Software and Application
AbstractDuration dependent Markov-switching VAR (DDMS-VAR) models are time series models with data generating process consisting in a mixture of two VAR processes. The switching between the two VAR processes is governed by a two state Markov chain with transition probabilities that depend on how long the chain has been in a state. In the present paper we analyze the second order properties of such models and propose a Markov chain Monte Carlo algorithm to carry out Bayesian inference on the model’s unknowns. Furthermore, a freeware software written by the author for the analysis of time series by means of DDMS-VAR models is illustrated. The methodology and the software are applied to the analysis of the U.S. business cycle.
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Bibliographic InfoPaper provided by Università degli Studi di Milano-Bicocca, Dipartimento di Statistica in its series Working Papers with number 20051101.
Length: 25 pages
Date of creation: Aug 2003
Date of revision: Nov 2005
Markov-switching; business cycle; Gibbs sampler; duration dependence; vector autoregression;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-25 (All new papers)
- NEP-ECM-2006-11-25 (Econometrics)
- NEP-ETS-2006-11-25 (Econometric Time Series)
- NEP-MAC-2006-11-25 (Macroeconomics)
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