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2011 Dec 01
1
Estimation of AR(1) Model with Markov Switching
...rkov switching regime model
# generate data for a AR(1) markov switching model with the following pars
# state 0: y_t = 2 + 0.5 * y_{t-1} + e_t
# state 1: y_t = 0.5 + 0.9 * y_{t-1} + e_t
# where e_t ~ N(0,1)
# transition probabilities p_s0_s1 = p_s1_s0 = 0.20
# generate realisations of the state
gamma_s0 <- qnorm(0.8)
gamma_s1 <- qnorm(0.2)
gamma <- rep(0,100)
state <- rep(0,100)
# choose initial state at t=0 to be state 0
gamma[1] <- gamma_s0
state[1] <- 0
for(i in 2:100) {
if(rnorm(1) < gamma[i-1]) {
gamma[i] <- gamma_s0
state[i] <- 0
}
else {
gamma[i] <-...