A Markov model for switching regressions

Goldfeld, Stephen M.; Quandt, Richard E.

doi:10.1016/0304-4076(73)90002-x

Cited by 664 publications

(321 citation statements)

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“…This methodology initially appeared in the form of switching regressions in Golfeld and Quandt (1973), and underwent a number of extensions and refinements. Hamilton (1989) and Krolzig (1998) made important contributions by combining switching models with vector autoregression to develop a MS-VAR which is well equipped to characterise macroeconomic fluctuations in the presence of structural breaks or shifts.…”

Section: Methodology: Markov-switching Vector Autoregressive (Ms-var)mentioning

confidence: 99%

Is the relationship between monetary policy and house prices asymmetric across bull and bear markets in South Africa? Evidence from a Markov-switching vector autoregressive model

et al. 2013

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Abstract. This paper examines asymmetries in the impact of monetary policy on the middle segment of the South African housing market from 1966:M2 to 2011:M12. We use Markov-switching vector autoregressive (MS-VAR) model in which parameters change according to the phase of the housing cycle. The results suggest that monetary policy is not neutral as house price growth decreases substantially with a contractionary monetary policy. We find that the impact of monetary policy is larger in bear regime than in bull regime; indicating the role of information asymmetry in reinforcing the financial constraint of economic agents. As expected, monetary policy reaction to a positive house price shock is found to be stronger in the bull regime. This suggests that central banks react more in bull regime in order to prevent potential crisis related to the subsequent bust in house prices bubbles which are more prominent in bull markets. These results substantiate important asymmetries in the dynamics of house prices in relation to monetary policy, vindicating the advantages of generating regime dependent impulse response functions.

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Section: Methodology: Markov-switching Vector Autoregressive (Ms-var)mentioning

confidence: 99%

Is the relationship between monetary policy and house prices asymmetric across bull and bear markets in South Africa? Evidence from a Markov-switching vector autoregressive model

et al. 2013

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“…The trajectory of the misalignment can confirm that the convergence process of the effective exchange rate of the Tunisian dinar towards its fundamental situation is characterized by nonlinearities, depending on whether Tunisia exchange rate is in under or overvaluation regimes [36][37][38]. In order to specify the trajectory of the misalignment of the effective exchange rate, the extent or degree of misalignment during the period 1980 to 2012 is graphically illustrated.…”

Section: Threshold Ecm Estimation Resultsmentioning

confidence: 95%

A Study of the Regime Switching in the Relationship between the Tunisian Exchange Rates and the Fundamental Economic Variables: A Further Investigation Using the Threshold Cointegration Theory

R¹,

Saoussen²

2017

J Glob Econ

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This paper introduces the regime switching models considered when determining the long run relationships between the Tunisian effective exchange rate and economic fundamentals over a period of 30 years. We employ the threshold cointegration approach in order to investigate the long run non-linear dynamics of the effective exchange rate. We introduce the threshold error correction model (TECM) to illustrate the discontinuity of the convergence process towards the long run equilibrium situation. The obtained results confirm the discontinuous or asymmetrical character of the trajectory of the Tunisian dinar towards its fundamental situation depending on whether Tunisia exchange rate is under -or overvaluation regimes. In addition, structural shifts from selected economic variables, may characterize this discontinuity in the convergence process.

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“…The concept of regime switching was first introduced by Goldfeld and Quant [49] in 1973 to characterize parameter changes in nonlinear and non-stationary models. Basically, a regime switching process involves an unobservable variable in the time-series that switches among a certain number of states with independent price process for each state.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Goldfeld and Quant [49] initiated this idea based on the vast quantity of work done on identifying nonlinear parameterizations and their importance. The regime switching models' state dependence on transition probabilities towards lagged level of instantaneous rates, along with the ability to illustrate the unit root traits of those rates assisted in predicting interest rates effectively, see [6,53].…”

Section: Literature Reviewmentioning

confidence: 99%