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Testing the null hypothesis of no regime switching with an application to GDP growth rates

  • Marmer, Vadim

This paper presents tests for the null hypothesis of no regime switching in Hamilton's (1989) regime switching model. The test procedures exploit similarities between regime switching models, autoregressions with measurement errors, and finite mixture models. The proposed tests are computationally simple and, contrary to likelihood based tests, have a standard distribution under the null. When the methodology is applied to US GDP growth rates, no strong evidence of regime switching is found.

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File URL: http://microeconomics.ca/vadim_marmer/hmt15.pdf
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Paper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number vadim_marmer-2009-59.

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Length: 31 pages
Date of creation: 02 Nov 2009
Date of revision: 03 Nov 2009
Handle: RePEc:ubc:pmicro:vadim_marmer-2009-59
Contact details of provider: Web page: http://www.economics.ubc.ca/

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  1. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
  2. BONTEMPS, Christian & MEDDAHI, Nour, 2002. "Testing Normality : A GMM Approach," Cahiers de recherche 2002-14, Universite de Montreal, Departement de sciences economiques.
  3. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 307-333.
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  5. Hanfeng Chen & Jiahua Chen & John D. Kalbfleisch, 2004. "Testing for a finite mixture model with two components," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 66(1), pages 95-115.
  6. Hamilton, James D., 1996. "Specification testing in Markov-switching time-series models," Journal of Econometrics, Elsevier, vol. 70(1), pages 127-157, January.
  7. Tsung Wu Ho, 2000. "Testing the hypothesis of Phillips curve trade-off: a regime switching approach," Applied Economics Letters, Taylor & Francis Journals, vol. 7(10), pages 645-647.
  8. 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.
  9. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
  10. 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, June.
  11. 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.
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