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Markov-switching MIDAS models

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  • Marcellino, Massimiliano

Abstract

This paper introduces a new regression model - Markov-switching mixed data sampling (MS-MIDAS) - that incorporates regime changes in the parameters of the mixed data sampling (MIDAS) models and allows for the use of mixed-frequency data in Markov-switching models. After a discussion of estimation and inference for MS-MIDAS, and a small sample simulation based evaluation, the MS-MIDAS model is applied to the prediction of the US and UK economic activity, in terms both of quantitative forecasts of the aggregate economic activity and of the prediction of the business cycle regimes. Both simulation and empirical results indicate that MSMIDAS is a very useful specification.

Suggested Citation

  • Marcellino, Massimiliano, 2011. "Markov-switching MIDAS models," CEPR Discussion Papers 8234, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8234
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    More about this item

    Keywords

    Business cycle; Mixed-frequency data; Non-linear models; Forecasting; Nowcasting;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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