Question: Consider again the AR(1) model with mixture observational errors de scribed in Example 4.10. Modify the MCMC algorithm in order to per form posterior inference

Consider again the AR(1) model with mixture observational errors de scribed in Example 4.10. Modify the MCMC algorithm in order to per form posterior inference when t has the following Markovian structure:

Pr( t = 2 t 1= 2)=Pr( t=1 t 1=1)=p and Pr( t = 2 t 1=1)=Pr( t=1 t 1= 2)=(1 p)

where p is known. For suggestions see, for instance, Carter and Kohn

(1994).

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