We present a new modelling framework for the bi-variate hidden Markov model. The proposed specification is composed by five latent Markovian chains which drive the evolution of the parameters of a bi-variate Gaussian distribution. The maximum likelihood estimator is computed via an expectation...

We introduce a new Stochastic Volatility model that postulates a general correlation structure between the shocks of the measurement and log volatility equations at different temporal lags. The resulting specification is able to better characterize the leverage effect and propagation in...

We apply a recently proposed Bayesian model selection technique, known as stochastic model specification search, for characterising the nature of the trend in macroeconomic time series. We illustrate that the methodology can be quite successfully applied to discriminate between stochastic and...