Obtaining Critical Values for Test of Markov Regime Switching

For Markov regime-switching models, a nonstandard test statistic must be used to test for the possible presence of multiple regimes. Carter and Steigerwald (2013, Journal of Econometric Methods 2: 25–34) derive the analytic steps needed to implement the Markov regime-switching test proposed by Cho a...

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Bibliographic Details
Published in:The Stata journal 2014-09, Vol.14 (3), p.481-498
Main Authors: Bostwick, Valerie K., Steigerwald, Douglas G.
Format: Article
Language:English
Subjects:
Markov processes
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Summary:For Markov regime-switching models, a nonstandard test statistic must be used to test for the possible presence of multiple regimes. Carter and Steigerwald (2013, Journal of Econometric Methods 2: 25–34) derive the analytic steps needed to implement the Markov regime-switching test proposed by Cho and White (2007, Econometrica 75: 1671–1720). We summarize the implementation steps and address the computational issues that arise. We then introduce a new command to compute regime-switching critical values, rscv, and present it in the context of empirical research.
ISSN:1536-867X
1536-8734
DOI:10.1177/1536867X1401400302