MS-ARDL

Discussion of models with structural breaks or endogenous switching.
abi
Posts: 74
Joined: Sat Apr 13, 2013 3:48 am

MS-ARDL

Unread post by abi »

Dear All,

does anyone has codes for estimation of a Markov-Switching ARDL model?

Thanks.
TomDoan
Posts: 7535
Joined: Wed Nov 01, 2006 4:36 pm

Re: MS-ARDL

Unread post by TomDoan »

An ARDL is just a specific form of linear regression. Use @MSRegression.
abi
Posts: 74
Joined: Sat Apr 13, 2013 3:48 am

Re: MS-ARDL

Unread post by abi »

Thank you Tom

could you please give more details?
TomDoan
Posts: 7535
Joined: Wed Nov 01, 2006 4:36 pm

Re: MS-ARDL

Unread post by TomDoan »

That's what the detailed description is for. None of our examples is for an ARDL, but the actual estimation isn't especially difficult. Whether you'll get the types of results you want is a completely different question. Typically, if you allow for switching variances, the main switch will be on variances rather than coefficients. See "How to Switch if You Must".
abi
Posts: 74
Joined: Sat Apr 13, 2013 3:48 am

Re: MS-ARDL

Unread post by abi »

Dear Tom,
Is there any guidance to set error correction term in short-run relationship?
TomDoan
Posts: 7535
Joined: Wed Nov 01, 2006 4:36 pm

Re: MS-ARDL

Unread post by TomDoan »

abi wrote:Dear Tom,
Is there any guidance to set error correction term in short-run relationship?
I'm not sure what you are asking. Does this have anything to do with the MS-ARDL? (The topic in which this is posted).
abi
Posts: 74
Joined: Sat Apr 13, 2013 3:48 am

Re: MS-ARDL

Unread post by abi »

Thank you for answer,
Actually i want to get the coefficient of the error correction which presents the speed of adjustment and leading to a long-run causal relationship (expected to range between −1 and 0). Could you please check below link and see ECT in table 2.
https://www.sciencedirect.com/science/a ... 05807#tbl1
I would be appreciated if you give me more detail to set ECT by @MSRegression.
TomDoan
Posts: 7535
Joined: Wed Nov 01, 2006 4:36 pm

Re: MS-ARDL

Unread post by TomDoan »

I'm baffled by what is being described in that paper. They are referencing procedures from Pesaran, Shin and Smith(2001) and the original Engle-Granger paper, neither of which do anything with Markov Switching (nor do they even anticipate an application to switching models). In particular, they describe having regime switching EC models (apparently) identified using the regime-specific residuals. The problem is that regime-specific residuals in MS models aren't really useful for anything because a residual for regime j in period t can be just about anything if the probability of regime j in period t is small. I may have missed it, but I don't even see where they describe the coefficients on the two EC models---only the loadings.

In most of the MS-VECM literature (and a one equation error correcting MS-ARDL would be a form of that), the assumption is that the cointegrating vector is fixed. Aside from the fact that it's almost inconceivable that you could have a reasonable model with regime-specific cointegrating vectors (which requires multiple "long run" equilibria that the process randomly moves towards), even if you had such a process, identifying it using a hidden regime model would be effectively impossible.

If the error correction term is fixed, then you can treat it as data and estimate the MS-ARDL using that as one of the regressors.
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