For Markov regime-switching models, a nonstandard test statistic must be used to test for the possible presence of multiple regimes. Carter and Steigerwald (2013, Journal of Econometric Methods 2: 25–34) derive the analytic steps needed to implement the Markov regime-switching test proposed by Cho and White (2007, Econometrica 75: 1671–1720). We summarize the implementation steps and address the computational issues that arise. We then introduce a new command to compute regime-switching critical values, rscv, and present it in the context of empirical research.
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CarterA. V., and SteigerwaldD. G.2013. Markov regime-switching tests: Asymptotic critical values. Journal of Econometric Methods2: 25–34.
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ChoJ. S., and WhiteH.2007. Testing for regime switching. Econometrica75: 1671–1720.
