Time-series model with periodic stochastic regime switching - Part II: Applications to 16th-and 17th-century grain prices

This paper provides a historical chronology of economic activity in 16th- a nd 17th-century France that is based on wheat price series in Paris and Tou louse. A stochastic regime-switching model enables us to benchmark eras and summarize the salient features of a development difficult to appraise in a ll its complexity. A new class of Markov regime-switching time-series model s is introduced to allow for nontrivial interdependencies between different types of cycles that make the economy grow at an unsteady rate. With a pre dominantly agricultural cycle, we uncover a strongly periodic Markov switch ing scheme for recorded wheat prices from the grain markets of Paris and To ulouse. Besides the periodic nature of the Markov chain, we also study whet her a common factor determined the state of the economy in Paris and Toulou se or whether each series moved independently.