Econometrica: Jul 2012, Volume 80, Issue 4
Testing for Regime Switching: A Comment
Andrew V. Carter, Douglas G. SteigerwaldAn autoregressive model with Markov regime‐switching is analyzed that reflects on the properties of the quasi‐likelihood ratio test developed by Cho and White (2007). For such a model, we show that consistency of the quasi‐maximum likelihood estimator for the population parameter values, on which consistency of the test is based, does not hold. We describe a condition that ensures consistency of the estimator and discuss the consistency of the test in the absence of consistency of the estimator.
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