I am doing a Markov switching analysis and am trying to interpret the transition matrix parameters. Here is output:
P11UNEMPAPR16 0.451288 0.147638 3.056732 0.0022
P21UNEMPAPR16 0.265242 0.102171 2.596068 0.0094
Does P21 mean probability of moving from regime 2 at time t1 to regime 1 at time t or probability of moving
from regime 1 at time t1 to regime 2 at time t?
Help appreciated! Thanks!
Harold
Harold Clarke
Transition Matrix Parameters
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Re: Transition Matrix Parameters
The convention that we use is as described in the documentation as P(i, j) = Pr(S_t = j  S_t1 = i).
. P21 is Pr(S_t = 1  S_t1 = 2), or from 2 > 1.
. So if I am thinking clearly this morning, in your case, increases in UNEMPAPR16 lowers the probability of transferring from 2>1, and increases the probability of staying in 1. Thus, you increase the probability of staying in the current state.
. P21 is Pr(S_t = 1  S_t1 = 2), or from 2 > 1.
. So if I am thinking clearly this morning, in your case, increases in UNEMPAPR16 lowers the probability of transferring from 2>1, and increases the probability of staying in 1. Thus, you increase the probability of staying in the current state.
Re: Transition Matrix Parameters
Thanks! This is exactly what I need to know.
Harold
Harold
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