10 CHAPTER 10: SWITCHING MODELS

10.1 Dummy variables for seasonality (Page 500)

library(foreign) 
data = read.dta("Dataset/macro.dta")
data = na.omit(data)

lm1 = lm(ermsoft~ersandp+dprod+dcredit+dinflation+dmoney+dspread+rterm+FEB98DUM+FEB03DUM+JANDUM,data=data)
summary(lm1)
## 
## Call:
## lm(formula = ermsoft ~ ersandp + dprod + dcredit + dinflation + 
##     dmoney + dspread + rterm + FEB98DUM + FEB03DUM + JANDUM, 
##     data = data)
## 
## Residuals:
##     Min      1Q  Median      3Q     Max 
## -60.001  -4.158   0.848   6.353  24.368 
## 
## Coefficients:
##               Estimate Std. Error t value Pr(>|t|)    
## (Intercept) -2.229e-01  8.980e-01  -0.248   0.8041    
## ersandp      1.386e+00  1.433e-01   9.676  < 2e-16 ***
## dprod       -1.242e+00  1.206e+00  -1.030   0.3039    
## dcredit     -3.181e-05  6.969e-05  -0.456   0.6484    
## dinflation   1.963e+00  2.242e+00   0.875   0.3820    
## dmoney      -3.737e-03  3.440e-02  -0.109   0.9136    
## dspread      4.282e+00  6.334e+00   0.676   0.4995    
## rterm        4.622e+00  2.287e+00   2.021   0.0442 *  
## FEB98DUM    -6.565e+01  1.160e+01  -5.661 3.41e-08 ***
## FEB03DUM    -6.680e+01  1.157e+01  -5.772 1.89e-08 ***
## JANDUM       4.127e+00  2.835e+00   1.456   0.1464    
## ---
## Signif. codes:  0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1
## 
## Residual standard error: 11.51 on 313 degrees of freedom
## Multiple R-squared:  0.3505, Adjusted R-squared:  0.3297 
## F-statistic: 16.89 on 10 and 313 DF,  p-value: < 2.2e-16

10.2 Estimating a Markov switching model (Page 513)

data = read.dta("Dataset/UKHP.dta")
data = na.omit(data)

library(MSwM)
lm2 = lm(data$dhp~1)
mod.mswm = msmFit(lm2,k=2,sw=rep(TRUE,2))
summary(mod.mswm)
## Markov Switching Model
## 
## Call: msmFit(object = lm2, k = 2, sw = rep(TRUE, 2))
## 
##        AIC      BIC    logLik
##   811.9284 830.2924 -403.9642
## 
## Coefficients:
## 
## Regime 1 
## ---------
##                Estimate Std. Error t value Pr(>|t|)
## (Intercept)(S)  -0.1884     0.1331 -1.4155   0.1569
## 
## Residual standard error: 1.180056
## Multiple R-squared:     0
## 
## Standardized Residuals:
##         Min          Q1         Med          Q3         Max 
## -3.21626368 -0.06468471  0.06928142  0.30928820  3.87777103 
## 
## Regime 2 
## ---------
##                Estimate Std. Error t value  Pr(>|t|)    
## (Intercept)(S)   0.9570     0.1058  9.0454 < 2.2e-16 ***
## ---
## Signif. codes:  0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1
## 
## Residual standard error: 0.9365897
## Multiple R-squared:     0
## 
## Standardized Residuals:
##         Min          Q1         Med          Q3         Max 
## -1.79190488 -0.30216667 -0.06922273  0.17371448  2.84467795 
## 
## Transition probabilities:
##            Regime 1   Regime 2
## Regime 1 0.97641911 0.02280896
## Regime 2 0.02358089 0.97719104
plotProb(mod.mswm,which=1)