By Chang-Jin Kim
Both state-space versions and Markov switching versions were hugely efficient paths for empirical examine in macroeconomics and finance. This e-book provides fresh advances in econometric equipment that make possible the estimation of types that experience either good points. One process, within the classical framework, approximates the chance functionality; the opposite, within the Bayesian framework, makes use of Gibbs-sampling to simulate posterior distributions from data.
The authors current a number of functions of those techniques intimately: decomposition of time sequence into pattern and cycle, a brand new index of coincident fiscal symptoms, techniques to modeling financial coverage uncertainty, Friedman's "plucking" version of recessions, the detection of turning issues within the company cycle and the query of no matter if booms and recessions are duration-dependent, state-space versions with heteroskedastic disturbances, fads and crashes in monetary markets, long-run actual alternate charges, and suggest reversion in asset returns.
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Additional info for State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications
From the Kalman filter recursion applied to the state-space model written in deviation from means, we have 51 52 Â < previous page page_52 next page > If you like this book, buy it! < previous page page_53 next page > Page 53 Harvey (1989) shows that for a stationary transition equation, the Kalman gain, Kt, approaches a steady-state Kalman gain, K, as . Given parameter estimates of the model, apply the Kalman filter to the model in deviation from means. The Kalman gain at the last iteration, KT, is the steady-state Kalman Gain.
1987. " In Advances in Econometrics, Fifth World Congress, of the Econometric Society, ed. Truman Bewley, vol. 1, 245-281. , and Paul Wachtel. (1978). " Journal of Monetary Economics, 4, 775-765. Hai, Weike, Nelson C. Mark, and Yangru Wu. 1996. " Working paper no. 56 57 96-03, Ohio State University, Columbus. Hamilton, James D. 1994a. Time Series Analysis. Princeton, NJ: Princeton University Press. Hamilton, James D. 1994b. " In Handbook of Econometrics, ed. R. F. Engel and D. L. McFadden, vol.
1982. " Journal of Monetary Economics, 10, 139-162. Perron, P. 1990. " Journal of Business and Economic Statistics, 8, 153-162. , and Mark W. Watson. 1991. " In Leading Economic Indicators: New Approaches and Forecasting Records, ed. K. Lahiri and G. H. Moore. Cambridge: Cambridge University Press 63-89. Tsay, Ruey S. 1987. " Journal of the American Statistical Association, (82)(398) Theory and Methods, 590-604. Â < previous page page_57 next page > 57 58 If you like this book, buy it! < previous page page_59 next page > Page 59 4 Markov-Switching Models Model instability is sometimes defined as a switch in a regression equation from one subsample period (or regime) to another.