TVTPTime-Varying Transition Probabilities
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(2) We assume the Markov process is governed by TVTP, which are functions of exogenous covariates and the previous period's state.
output growth, [y.sup.US.sub.t-1] The FTP model is nested under the TVTP framework if the covariate has no effect under each state realization (i.e., [[beta].sub.ji] = 0 for i = 1,2 and j = 1,2).
However, interpreting these coefficients in the logistic framework of TVTP is less straightforward than in a simple linear regression model.