A structural Time Series Model with Markov Switching
AbstractWe propose an innovations form of the structural model underlying exponential smoothing that is further augmented by a latent Markov switching process. A particular case of the new model is the local level model with a switching drift, where the switching component describes the change between high and low growth rate periods. This new model is used to analyse the US business cycle using US Quarterly real GNP data. Model parameters are estimated using a Gibbs sampling algorithm and subsequently used for forecasting purposes. In addition, the stability of the new model is tested against Hamilton's model over a range of observation periods.
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Bibliographic InfoPaper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 10/00.
Length: 29 pages
Date of creation: Dec 2000
Date of revision:
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Postal: PO Box 11E, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/depts/ebs/
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Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
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