Analytical Derivatives for Markov Switching Models

  • Authors:

  • Jeff Gable;Simon Van Norden;Robert Vigfusson

  • Affiliations:

  • International Monetary Fund;Research Department, Bank of Canada, Ottawa, Ontario, Canada K1A 0G9;International Department, Bank of Canada, Ottawa, Ontario, Canada K1A 0G9

  • Venue:
  • Computational Economics
  • Year:
  • 1997

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Abstract

This paper presents analytical gradients for a broad class ofregime-switching models with Markovian state-transition probabilities.Such models are usually estimated by maximum likelihood methods, whichrequire the derivatives of the likelihood function with respect to theparameter vector. These gradients are usually calculated by means ofnumerical techniques. The paper shows that analytical gradientsconsiderably speed up maximum-likelihood estimation.