Hello!
How to choose optimal number of regimes for MS-BSVAR?
Thank you in advance.
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Re: MS-BSVAR
by jpfeifer » Tue Apr 28, 2015 5:42 am
There are no general guidelines. You could work from marginal data densities or similar criteria to determine the optimal number. But in practice people often have a strong prior and go for a small number of regimes as the data is often not sufficiently informative to provide insights into a bigger number of regimes.
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