Forecasts with Single-Equation Markov-Switching Model: an Application to the Gross Domestic Product of Latvia

Journal of Applied Economic Sciences 2010
Ginters Bušs

The paper compares one-period ahead forecasting performance of linear vector-autoregressive (VAR) models and single-equation Markov-switching (MS) models for two cases: when leading information is available and when it is not. The results show that single-equation MS models tend to perform slightly better than linear VAR models when no leading information is available. However, if reliable leading information is available, single-equation MS models tend to give somewhat less precise forecasts than linear VAR models.

Keywords
Markov-switching, VAR, forecasting, leading information
Hyperlink
http://www.jaes.reprograph.ro/articles/summer2010/Jaes_Summer_2010.pdf

Bušs, G. Forecasts with Single-Equation Markov-Switching Model: an Application to the Gross Domestic Product of Latvia. Journal of Applied Economic Sciences, 2010, Vol. 5, No. 2, pp.49-59. ISSN 1843-6110.

Publication language
English (en)