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Multivariate Markov switching with weighted regime determination: giving France more weight than Finland


  • Michael J. Dueker
  • Martin Sola


This article deals with using panel data to infer regime changes that are common to all of the cross section. The methods presented here apply to Markov switching vector autoregressions, dynamic factor models with Markov switching and other multivariate Markov switching models. The key feature we seek to add to these models is to permit cross-sectional units to have different weights in the calculation of regime probabilities. We apply our approach to estimating a business cycle chronology for the 50 U.S. States and the Euro area, and we compare results between country-specific weights and the usual case of equal weights. The model with weighted regime determination suggests that Europe experienced a recession in 2002-03, whereas the usual model with equal weights does not.

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  • Michael J. Dueker & Martin Sola, 2008. "Multivariate Markov switching with weighted regime determination: giving France more weight than Finland," Working Papers 2008-001, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2008-001

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    References listed on IDEAS

    1. Marcelle Chauvet & James D. Hamilton, 2005. "Dating Business Cycle Turning Points," NBER Working Papers 11422, National Bureau of Economic Research, Inc.
    2. Filippo Altissimo & Antonio Bassanetti & Riccardo Cristadoro & Mario Forni & Marco Lippi & Lucrezia Reichlin & Giovanni Veronese, 2001. "A real time coincident indicator of the euro area business cycle," Temi di discussione (Economic working papers) 436, Bank of Italy, Economic Research and International Relations Area.
    3. Altissimo, Filippo & Bassanetti, Antonio & Cristadoro, Riccardo & Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle," CEPR Discussion Papers 3108, C.E.P.R. Discussion Papers.
    4. Chang-Jin Kim & Charles R. Nelson, 1998. "Business Cycle Turning Points, A New Coincident Index, And Tests Of Duration Dependence Based On A Dynamic Factor Model With Regime Switching," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 188-201, May.
    5. Asea, Patrick K. & Blomberg, Brock, 1998. "Lending cycles," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 89-128.
    6. Christopher A. Sims & Tao Zha, 2006. "Were There Regime Switches in U.S. Monetary Policy?," American Economic Review, American Economic Association, vol. 96(1), pages 54-81, March.
    7. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, vol. 75(1), pages 79-97, November.
    8. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-996, November.
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    Cited by:

    1. Catherine Doz & Anna Petronevich, 2015. "Dating Business Cycle Turning Points for the French Economy: a MS-DFM approach," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01159200, HAL.
    2. repec:hal:journl:hal-01159200 is not listed on IDEAS

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    Business cycles ; France ; Finland;

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