A Bayesian Approach to Testing for Markov Switching in Univariate and Dynamic Factor Models
Though Hamilton's (1989) Markov-switching model has been widely estimated in various contexts, formal testing for Markov-switching is not straightforward. Univariate tests in the classical framework by Hansen (1992) and Garcia (1998) do not reject the linear model for GDP. We present Bayesian tests for Markov-switching in both univariate and multivariate settings based on sensitivity of the posterior probability to the prior. We find that evidence for Markov-switching, and thus the business cycle asymmetry, is stronger in a switching version of the dynamic factor model of Stock and Watson (1991) than it is for GDP by itself.
(This abstract was borrowed from another version of this item.)
|Date of creation:||Sep 1999|
|Contact details of provider:|| Postal: Box 353330, Seattle, WA 98193-3330|
Web page: http://www.econ.washington.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon M. Potter, 1993.
"A Nonlinear Approach to U.S. GNP,"
UCLA Economics Working Papers
693, UCLA Department of Economics.
- Francis X. Diebold & Glenn D. Rudebusch, 1999. "Business Cycles: Durations, Dynamics, and Forecasting," Economics Books, Princeton University Press, edition 1, number 6636.
- Albert, James H & Chib, Siddhartha, 1993. "Bayes Inference via Gibbs Sampling of Autoregressive Time Series Subject to Markov Mean and Variance Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 1-15, January.
- Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
- Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
- Francis X. Diebold & Glenn D. Rudebusch, 1994.
"Measuring Business Cycles: A Modern Perspective,"
NBER Working Papers
4643, National Bureau of Economic Research, Inc.
- Kim, C-J & Nelson, C-R, 1997.
"Friedman's Plucking Model of Business Fluctuations : Tests and Estimates of Permanent and Transitory Components,"
97-06, University of Washington, Department of Economics.
- Kim, Chang-Jin & Nelson, Charles R, 1999. "Friedman's Plucking Model of Business Fluctuations: Tests and Estimates of Permanent and Transitory Components," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 317-34, August.
- Kim, C-J & Nelson, C-R, 1997. "Friedman's Plucking Model of Business Fluctuations : Tests and Estimates of Permanent and Transitory Components," Discussion Papers in Economics at the University of Washington 97-06, Department of Economics at the University of Washington.
- Andrew J. Filardo & Stephen F. Gordon, 1995. "Business cycle turning points: two empirical business cycle model approaches," Research Working Paper 95-15, Federal Reserve Bank of Kansas City.
- Gordon, S.F. & Filardo, A.J., 1993.
"Business Cycle Durations,"
9328, Laval - Recherche en Politique Economique.
- Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388.
- Perron, P., 1989.
"Testing For A Unit Root In A Time Series With A Changing Mean,"
347, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-162, April.
- 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.
- Koop, Gary & Potter, Simon M., 1998. "Bayes factors and nonlinearity: Evidence from economic time series1," Journal of Econometrics, Elsevier, vol. 88(2), pages 251-281, November.
- René Garcia, 1995.
"Asymptotic Null Distribution of the Likelihood Ratio Test in Markov Switching Models,"
CIRANO Working Papers
- Garcia, Rene, 1998. "Asymptotic Null Distribution of the Likelihood Ratio Test in Markov Switching Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 763-788, August.
- Zivot, E., 1993. "A Bayesian Analysis of the Unit Root Hypothesis Within an Unobserved Components Model," Discussion Papers in Economics at the University of Washington 93-15, Department of Economics at the University of Washington.
- 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 357-384, March.
- Zivot, Eric, 1994. "A Bayesian Analysis Of The Unit Root Hypothesis Within An Unobserved Components Model," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 552-578, August.
- Perman, Roger & Scouller, John, 1999. "Business Economics," OUP Catalogue, Oxford University Press, number 9780198775249, December.
- Hansen, Bruce E, 1992. "The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S61-82, Suppl. De.
When requesting a correction, please mention this item's handle: RePEc:fth:washer:0035. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.