The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Regime Switching Models

  • James D. Hamilton
Reference work entry


If the parameters of a time-series process are subject to change over time, then a full description of the data-generating process must include a specification of the probability law governing these changes, for example, postulating that the parameters evolve according to the realization of an unobserved Markov chain. This article describes classical and Bayesian algorithms for estimation and inference in such models and discusses some of the issues that arise in particular cases such as GARCH and state-space models.


ARMA models Asset prices Econometrics GARCH models Gaussian densities Gibbs sampler Kalman filter Markov chain Monte Carlo methods Markov processes Maximum likelihood Numerical optimization methods in economics Regime-switching models State-space models Vector autoregressions 

JEL Classifications

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • James D. Hamilton
    • 1
  1. 1.