Applying Flexible Parameter Restrictions in Markov-Switching Vector Autoregression Models

19 Pages Posted: 13 Jan 2016

Date Written: December 1, 2015

Abstract

We present a new method for imposing parameter restrictions in Markov-Switching Vector Autoregression (MS-VAR) models. Our method is more flexible than competing methodologies and easily handles a range of parameter restrictions over different equations, regimes and parameter types. We also expand the range of priors used in the MS-VAR literature. We demonstrate the versatility of our approach using three appropriate examples.

Keywords: Parameter Restrictions, MS-VAR estimation, Block Exogeneity, Zero Restrictions, Bayesian estimation

Suggested Citation

Binning, Andrew and Maih, Junior, Applying Flexible Parameter Restrictions in Markov-Switching Vector Autoregression Models (December 1, 2015). Norges Bank Working Paper 17/2015, Available at SSRN: https://ssrn.com/abstract=2714375

Andrew Binning (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Junior Maih

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

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