Volatility forecasting revisited using Markov‐switching with time‐varying probability transition

2020 ◽  
Author(s):  
Jiqian Wang ◽  
Feng Ma ◽  
Chao Liang ◽  
Zhonglu Chen
Keyword(s):  
Markov Switching ◽  
Time Varying ◽  
Volatility Forecasting

scholarly journals A TIME-VARYING MARKOV-SWITCHING MODEL FOR ECONOMIC GROWTH

2015 ◽  
Vol 20 (6) ◽  
pp. 1550-1580 ◽  
Author(s):  
Bruno Morier ◽  
Vladimir Kühl Teles
Keyword(s):  
Economic Growth ◽  
Transition Matrix ◽  
Markov Switching ◽  
Institutional Quality ◽  
Growth Patterns ◽  
Time Varying ◽  
Markov Switching Model ◽  
Investment Level ◽  
Stable Growth ◽  
Over Time

This paper investigates patterns of variation in economic growth across and within countries using a time-varying transition matrix Markov-switching approach. The model developed here explains the dynamics of growth based on a collection of different states that countries pass into and out of over time; in addition, these states are characterized by their own submodels and growth patterns. The transition matrix among the different states varies over time—depending on the conditioning variables of each country—with a linear dynamic for each state. We develop a generalization of Diebold's EM algorithm and estimate a sample model in a panel with a transition matrix conditioned on institutional quality and the investment level. We find three states of growth: stable growth, miraculous growth, and stagnation. The results show that institutional quality is an important determinant of long-term growth, whereas the investment level plays a variety of roles: it contributes positively in countries with high-quality institutions but is of little relevance in countries with medium- or low-quality institutions.

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