Spectral representation and autocovariance structure of Markov switching DSGE models |
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Authors: | Maddalena Cavicchioli |
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Institution: | 1. Department of Economics “Marco Biagi”, Modena, Italymaddalena.cavicchioli@unimore.it |
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Abstract: | AbstractWe investigate the L2-structure of Markov switching Dynamic Stochastic General Equilibrium (MS DSGE) models and derive conditions for strict and second-order stationarity. Then we determine the autocovariance function of the process driven by a stationary MS DSGE model and give a stable VARMA representation of it. It turns out that the autocovariance structure of the process coincides with that of a standard VARMA. Finally, we propose a method to derive the spectral density in a matrix closed-form of MS DSGE models. Our results relate with the works of Francq and Zakoian, Krolzig, Zhang and Stine. Numerical and empirical illustrations complete the article. |
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Keywords: | Multivariate DSGE state-space models Markov chains changes in regime autocovariance structure spectral density function |
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