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On Regime Separation in Markov-Switching Quantile Regressions

Author

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  • Gabriel Montes-Rojas
  • Zacharias Psaradakis
  • Martín Sola

Abstract

We consider models for conditional quantiles in which parameters are subject to discrete changes governed by an exogenous, unobservable Markov chain. We argue that all quantiles of the conditional distribution of the response variable should share the Markov regimes. This gives an unambiguous classification of regimes and allows the capture of quantile-specific characteristics conditionally on the hidden regimes. The potential of our approach is illustrated using a quantile autoregression for U.S. inflation.

Suggested Citation

  • Gabriel Montes-Rojas & Zacharias Psaradakis & Martín Sola, 2024. "On Regime Separation in Markov-Switching Quantile Regressions," Department of Economics Working Papers 2024_05, Universidad Torcuato Di Tella.
    • Handle: RePEc:udt:wpecon:2024_05
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    References listed on IDEAS

    as
    1. Komunjer, Ivana, 2005. "Quasi-maximum likelihood estimation for conditional quantiles," Journal of Econometrics, Elsevier, vol. 128(1), pages 137-164, September.
    2. Koenker, Roger & Xiao, Zhijie, 2006. "Quantile Autoregression," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 980-990, September.
    3. Oka, Tatsushi & Qu, Zhongjun, 2011. "Estimating structural changes in regression quantiles," Journal of Econometrics, Elsevier, vol. 162(2), pages 248-267, June.
    4. Xiaochun Liu, 2016. "Markov switching quantile autoregression," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 70(4), pages 356-395, November.
    5. Machado, José A.F., 1993. "Robust Model Selection and M-Estimation," Econometric Theory, Cambridge University Press, vol. 9(3), pages 478-493, June.
    6. Antonio F. Galvao JR. & Gabriel Montes-Rojas & Sung Y. Park, 2013. "Quantile Autoregressive Distributed Lag Model with an Application to House Price Returns," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(2), pages 307-321, April.
    7. Ye, Wuyi & Zhu, Yangguang & Wu, Yuehua & Miao, Baiqi, 2016. "Markov regime-switching quantile regression models and financial contagion detection," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 21-26.
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    More about this item

    Keywords

    Markov Switching; Quantile Regressions.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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