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Structural vector autoregressions with Markov switching

Author

Listed:
  • Lanne, Markku
  • Lütkepohl, Helmut
  • Maciejowska, Katarzyna

Abstract

It is argued that in structural vector autoregressive (SVAR) analysis a Markov regime switching (MS) property can be exploited to identify shocks if the reduced form error covariance matrix varies across states. The model setup is formulated and discussed and it is shown how it can be used to test restrictions which are just-identifying in a standard structural vector autoregressive analysis. The approach is illustrated by two SVAR examples which have been reported in the literature and which have features that can be accommodated by the MS structure.

Suggested Citation

  • Lanne, Markku & Lütkepohl, Helmut & Maciejowska, Katarzyna, 2010. "Structural vector autoregressions with Markov switching," Journal of Economic Dynamics and Control, Elsevier, vol. 34(2), pages 121-131, February.
    • Handle: RePEc:eee:dyncon:v:34:y:2010:i:2:p:121-131
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    More about this item

    Keywords

    Cointegration Markov regime switching model Vector error correction model Structural vector autoregression;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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