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Analytical Derivatives for Markov Switching Models

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Abstract

This paper presents analytical gradients for a broad class of regime-switching models with Markovian state-transition probabilities. Such models are usually estimated by maximum likelihood methods, which require the derivatives of the likelihood function with respect to the parameter vector. These gradients are usually calculated by means of numerical techniques. The paper shows that analytical gradients considerably speed up maximum-likelihood estimation.

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Authors and Affiliations

  1. International Monetary Fund, Canada

    JEFF GABLE

  2. Research Department, Bank of Canada, Ottawa, Ontario, Canada, K1A 0G9

    SIMON VAN NORDEN

  3. International Department, Bank of Canada, Ottawa, Ontario, Canada, K1A 0G9

    ROBERT VIGFUSSON

Authors
  1. JEFF GABLE
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  2. SIMON VAN NORDEN
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  3. ROBERT VIGFUSSON
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GABLE, J., VAN NORDEN, S. & VIGFUSSON, R. Analytical Derivatives for Markov Switching Models. Computational Economics 10, 187–194 (1997). https://doi.org/10.1023/A:1008671903509

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  • DOI: https://doi.org/10.1023/A:1008671903509

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