## Transition Matrix Parameters

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hclarke
Posts: 2
Joined: Tue Dec 25, 2018 10:34 am

### Transition Matrix Parameters

I am doing a Markov switching analysis and am trying to interpret the transition matrix parameters. Here is output:

P11-UNEMPAPR16 0.451288 0.147638 3.056732 0.0022
P21-UNEMPAPR16 -0.265242 0.102171 -2.596068 0.0094

Does P21 mean probability of moving from regime 2 at time t-1 to regime 1 at time t or probability of moving
from regime 1 at time t-1 to regime 2 at time t?

Help appreciated! Thanks!
Harold
Harold Clarke

EViews Glenn
EViews Developer
Posts: 2636
Joined: Wed Oct 15, 2008 9:17 am

### Re: Transition Matrix Parameters

The convention that we use is as described in the documentation as P(i, j) = Pr(S_t = j | S_t-1 = i).

. P21 is Pr(S_t = 1 | S_t-1 = 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.

hclarke
Posts: 2
Joined: Tue Dec 25, 2018 10:34 am

### Re: Transition Matrix Parameters

Thanks! This is exactly what I need to know.
Harold