IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Modelling Regime Switching and Structural Breaks with an Infinite Dimension Markov Switching Model

  • Yong Song

This paper proposes an infinite dimension Markov switching model to accommodate regime switching and structural break dynamics or a combination of both in a Bayesian framework. Two parallel hierarchical structures, one governing the transition probabilities and another governing the parameters of the conditional data density, keep the model parsimonious and improve forecasts. This nonparametric approach allows for regime persistence and estimates the number of states automatically. A global identification algorithm for structural changes versus regime switching is presented. Applications to U.S. real interest rates and inflation compare the new model to existing parametric alternatives. Besides identifying episodes of regime switching and structural breaks, the hierarchical distribution governing the parameters of the conditional data density provides significant gains to forecasting precision.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.economics.utoronto.ca/public/workingPapers/tecipa-427.pdf
File Function: Main Text
Download Restriction: no

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-427.

as
in new window

Length: 49 pages
Date of creation: 15 Apr 2011
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-427
Contact details of provider: Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-427. 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: (RePEc Maintainer)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.