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Markov Switching Autoregressive Model for WTI Crude Oil Price

Author

Listed:
  • Çiğdem YILMAZ

    (Department of Econometrics, Institution of Social Sciences, İstanbul University, Fatih, İstanbul, Turkey)

  • Nilgün ÇİL

    (Department of Econometrics, Institution of Social Sciences, İstanbul University, Fatih, İstanbul, Turkey)

Abstract

In this study, we aimed to test the nonlinear structure of crude oil prices with Markov Regime Switching Autoregressive Models. In the study of weekly prices covering the period from May 06, 1990 to April 11, 2018, a two-regime Markov switching model was applied. In the case of two regimes, we proved the that the probability the process will be in regime 1 or 2 is given by steady-state probabilities. As a result, it can be seen that the predictions made by the Markov switching autoregressive model were succesful.

Suggested Citation

  • Çiğdem YILMAZ & Nilgün ÇİL, 2018. "Markov Switching Autoregressive Model for WTI Crude Oil Price," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 14(28), pages 45-56, December.
    • Handle: RePEc:ist:ekoist:v:14:y:2018:i:28:p:45-56
    DOI: 10.26650/ekoist.2018.14.28.0003
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    References listed on IDEAS

    as
    1. Shiu-Sheng Chen, 2014. "Forecasting Crude Oil Price Movements With Oil-Sensitive Stocks," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 830-844, April.
    2. Middendorf, Torge & Schmidt, Torsten, 2004. "Characterizing Movements of the U.S. Current Account Deficit," RWI Discussion Papers 24, RWI - Leibniz-Institut für Wirtschaftsforschung.
    3. Bassam Fattouh, 2005. "Capital mobility and sustainability: Evidence from U.S. current account data," Empirical Economics, Springer, vol. 30(1), pages 245-253, January.
    4. Xuluo Yin & Jiangang Peng & Tian Tang, 2018. "Improving the Forecasting Accuracy of Crude Oil Prices," Sustainability, MDPI, vol. 10(2), pages 1-9, February.
    5. Zacharias Psaradakis & Nicola Spagnolo, 2003. "On The Determination Of The Number Of Regimes In Markov‐Switching Autoregressive Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(2), pages 237-252, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Regime change; Markov Switching Autoregressive Models; Crude Oil;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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