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Obtaining Critical Values for Test of Markov Regime Switching

  • Author(s): Steigerwald, Douglas G
  • Bostwick, Valerie K
  • et al.
Abstract

For Markov regime-switching models, testing for the possible presence ofmore than one regime requires the use of a non-standard test statistic. Carterand Steigerwald (forthcoming, Journal of Econometric Methods) derive in detailthe analytic steps needed to implement the test ofMarkov regime-switchingproposed by Cho and White (2007, Econometrica). We summarize the implementationsteps and address the computational issues that arise. A newcommand to compute regime-switching critical values, rscv, is introduced andpresented in the context of empirical research.

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