We investigate whether the response of the macro-economy to oil price shocks undergoes episodic changes. Employing a regime-switching vector autoregressive model we identify two regimes that are characterized by qualitatively different patterns in economic activity and inflation following oil...

This paper investigates some finite-sample issues that arise in the analysis of Markovswitching autoregressive models with time-varying probabilities. An extensive simulation study is undertaken to examine the small-sample properties of the maximum likelihood estimator and related statistics,...

We use Markov chain methods to develop a flexible class of discrete stochastic autoregressive volatility (DSARV) models. Our approach to formulating the models is straightforward, and readily accommodates features such as volatility asymmetry and time-varying volatility persistence. Moreover, it...

We examine the relationship between short term interest rates and UK equity returns using a two regime Markov Switching EGARCH model. We find one high-return, low variance regime in which the conditional variance of equity returns responds persistently but symmetrically to equity return...