Hidden Markov Models, Markov Chains, Markov Switching, Markov Auto Regression, Maximum Likelihood.
variable and we would have regressed y_t on s_t! Formulation of the hidden random variable s_t For the unemployment data set, we will assume that s_t obeys a 2-state Markov process having the following state transition diagram: A 2-state Markov process (Image by Author) The Markov chain shown above