Disequilibrium Modeling, Switching Regressions, and Their Relationship to Structural Change
Disequilibrium and self-selection models do not directly deal with structural change. But both are switching regression models with endogenous switching and the techniques of analysis for switching regression models can be used to study structural change. The chapter discusses the different uses of these models in the modeling of structural change. One class of such models is the Markov switching model which has been used to analyze exchange rates, stock prices, and nonstationary time series. These are models with exogenous switching. The other class of models, with endogenous switching, can be fruitfully applied to analyze structural change which follow policy changes that eliminate opportunities of self-selection that economic agents have.
KeywordsCovariance Transportation Income Drilling Expense
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