Dear all,

I am trying to implement a model where a parameter follows a two-state markov process. That is, a regime shfit. How do I implement it in dynare? Specifically, I have the following in mind:

x_{t+1} = \rho x_t + \epsilon_t+ c_t

where constant c_t takes two values and follows a markov process c \in \{c_l, c_h\}.

Is it possible to model this type of discrete shock (markov process) in dynare? I also hope to conduct impusle response analysis for a shock that switches c_l to c_h (or reverse)

Thanks!