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SOME PROPERTIES OF VECTOR AUTOREGRESSIVE PROCESSES WITH MARKOV-SWITCHING COEFFICIENTS

Published online by Cambridge University Press:  01 February 2000

Minxian Yang
Affiliation:
University of New South Wales
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Abstract

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Some statistical properties of a vector autoregressive process with Markov-switching coefficients are considered. Sufficient conditions for this nonlinear process to be covariance stationary are given. The second moments of the process are derived under the conditions. The autocovariance matrix decays at exponential rate, permitting the application of the law of large numbers. Under the stationarity conditions, although sharing the “mean-reverting” property with conventional linear stationary processes, the process offers richer short-run dynamics such as conditional heteroskedasticity, asymmetric responses, and occasional nonstationary behavior.

Information

Type
Research Article
Copyright
© 2000 Cambridge University Press