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Time reversibility of stationary regular finite-state Markov chains

  • McCausland, William J.

We propose an alternate parameterization of stationary regular finite-state Markov chains, and a decomposition of the parameter into time reversible and time irreversible parts. We demonstrate some useful properties of the decomposition, and propose an index for a certain type of time irreversibility. Two empirical examples illustrate the use of the proposed parameter, decomposition and index. One involves observed states; the other, latent states.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 136 (2007)
Issue (Month): 1 (January)
Pages: 303-318

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Handle: RePEc:eee:econom:v:136:y:2007:i:1:p:303-318
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  1. Melvin J. Hinich & Philip Rothman, . "A Frequency Domain Test of Time Reversibility," Working Papers 9706, East Carolina University, Department of Economics.
  2. Clements, Michael P & Krolzig, Hans-Martin, 2003. "Business Cycle Asymmetries: Characterization and Testing Based on Markov-Switching Autoregressions," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 196-211, January.
  3. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, vol. 75(1), pages 79-97, November.
  4. Robinson, P M, 1991. "Consistent Nonparametric Entropy-Based Testing," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 437-53, May.
  5. Fong, Wai Mun, 2003. "Time reversibility tests of volume-volatility dynamics for stock returns," Economics Letters, Elsevier, vol. 81(1), pages 39-45, October.
  6. Andrew Eckert, 2002. "Retail price cycles and response asymmetry," Canadian Journal of Economics, Canadian Economics Association, vol. 35(1), pages 52-77, February.
  7. Eckert, Andrew, 2003. "Retail price cycles and the presence of small firms," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 151-170, February.
  8. William J. McCausland, 2004. "Using the BACC Software for Bayesian Inference," Computational Economics, Society for Computational Economics, vol. 23(3), pages 201-218, 04.
  9. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  10. Serge Darolles & Jean-Pierre Florens & Christian Gourieroux, 2000. "Kernel Based Nonlinear Canonical Analysis and Time Reversibility," Working Papers 2000-18, Centre de Recherche en Economie et Statistique.
  11. Darolles, Serge & Florens, Jean-Pierre & Gourieroux, Christian, 2004. "Kernel-based nonlinear canonical analysis and time reversibility," Journal of Econometrics, Elsevier, vol. 119(2), pages 323-353, April.
  12. McCAUSLAND, William J., 2004. "Time Reversibility of Stationary Regular Finite State Markov Chains," Cahiers de recherche 09-2004, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  13. Chen, Yi-Ting & Chou, Ray Y. & Kuan, Chung-Ming, 2000. "Testing time reversibility without moment restrictions," Journal of Econometrics, Elsevier, vol. 95(1), pages 199-218, March.
  14. John Geweke, 1999. "Using simulation methods for bayesian econometric models: inference, development,and communication," Econometric Reviews, Taylor & Francis Journals, vol. 18(1), pages 1-73.
  15. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  16. Ramsey, James B & Rothman, Philip, 1996. "Time Irreversibility and Business Cycle Asymmetry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 1-21, February.
  17. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
  18. Scott S. L., 2002. "Bayesian Methods for Hidden Markov Models: Recursive Computing in the 21st Century," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 337-351, March.
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