Testing between Different Types of Switching Regression Models

During the last years a number of methodological papers on models with periodic discrete parameter shifts have revived interest in these so- called regime switching models and have inspired much applied work in various branches of economics. Different types of switching models are in use, and in many cases the use of a particular model type is not justified on statistical grounds. This paper suggests a new procedure to test between different types of such models based on embedding these models within a more general one. First simulation results of the quality of this test are presented, and finally directions for further research are suggested.