Identification-Robust Moment-Based Tests for Markov-Switching in Autoregressive Models

CRREP working paper 2017-01

22 Pages Posted: 30 Mar 2018 Last revised: 13 May 2018

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2017


This paper develops tests of the null hypothesis of linearity in the context of autoregressive models with Markov-switching means and variances. These tests are robust to the identification failures that plague conventional likelihood-based inference methods. The approach exploits the moments of normal mixtures implied by the regime-switching process and uses Monte Carlo test techniques to deal with the presence of an autoregressive component in the model specification. The proposed tests have very respectable power in comparison to the optimal tests for Markov-switching parameters of Carrasco et al. (2014) and they are also quite attractive owing to their computational simplicity. The new tests are illustrated with an empirical application to an autoregressive model of U.S. output growth.

Keywords: Mixture distributions, Markov chains, Regime switching, Parametric bootstrap, Monte Carlo tests, Exact inference

JEL Classification: C12, C15, C22, C52

Suggested Citation

Dufour, Jean-Marie and Luger, Richard, Identification-Robust Moment-Based Tests for Markov-Switching in Autoregressive Models (January 1, 2017). CRREP working paper 2017-01, Available at SSRN: or

Jean-Marie Dufour (Contact Author)

McGill University ( email )

Department of Economics, McGill University
Leacock Building Room 443, 855 Sherbrooke West
Montreal, Quebec H3A 2T7
(1) 514 398 6071 (Phone)
(1) 514 398 4800 (Fax)


Richard Luger

Université Laval ( email )

Université Laval
Département de finance, assurance et immobilier
Quebec City, Quebec

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