A Markov-switching model with component structure for US GNP

The two-regime Markov-switching model that James Hamilton estimated for US real GNP up to 1984 does not survive extension of the data set. To allow for the ‘Great Moderation’ we require a mean and variance regime that evolve separately. The Markov-switching component model is proposed as a way to avoid estimating a fragile four-regime model. The resulting model captures business cycles and structural change in the variance well.

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Year of publication:	2013
Authors:	Doornik, Jurgen A.
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 118.2013, 2, p. 265-268
Publisher:	Elsevier
Subject:	Business cycles \| Great moderation \| Markov-switching models \| US GNP

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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