Markov Switching Regression

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Markov Switching Regression

Postby Kvarforth » Thu Aug 31, 2017 9:39 am


I have a question about Markov switching regression (sry for the horrible formula... I couldn't find a writing manual). I want to estimate the following regression equation:

x_t = c + a x_t-1 + b D

Where x_t is the parameter I want to estimate with x_t-1 as a lag and a as the coefficient; c is a constant and D is a dummy variable (notice that I didn't use a time index) with b as the coefficient. The dummy variable is either 1 or 0. I only have data for x from 2000 to 2010 and I want to estimate the above regression using a markov switching regression for this time span. But I have a much longer time span for the dummy variable from 1900-2010.
So I want to estimate the switching probability for the dummy variable with a maximum likelihood estimation based on the longer time span from 1900-2010 and use this probability for the markov switching regression. I'm using EVIEWS 10.
Thank you for your help.

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