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Our modeling approach is motivated by evidence suggesting the existence of breaks in the behavior of the US yield curve that depend, for example, on whether the economy is in a recession or a boom, or on the stance of monetary policy. Our model is parsimonious, relatively easy to estimate and flexible enough to match the changing shapes of the yield curve over time. We also derive the discrete time non\u2010arbitrage restrictions for the Markov switching model. We compare the forecasting performance of these models with that of the standard dynamic Nelson and Siegel model and an extension that allows the decay rate parameter to be time varying. We show that some parametrizations of our model with regime shifts outperform the single\u2010regime Nelson and Siegel model and other standard empirical models of the yield curve. Copyright \u00a9 2014 John Wiley &amp; Sons, Ltd.<\/jats:p>","DOI":"10.1002\/jae.2399","type":"journal-article","created":{"date-parts":[[2014,6,26]],"date-time":"2014-06-26T05:43:16Z","timestamp":1403761396000},"page":"987-1009","source":"Crossref","is-referenced-by-count":25,"title":["Estimating and Forecasting the Yield Curve Using A Markov Switching Dynamic Nelson and Siegel Model"],"prefix":"10.1002","volume":"30","author":[{"given":"Constantino","family":"Hevia","sequence":"first","affiliation":[{"name":"Department of Economics Universidad Torcuato Di Tella Buenos Aires Argentina"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Martin","family":"Gonzalez\u2010Rozada","sequence":"additional","affiliation":[{"name":"Department of Economics Universidad Torcuato Di Tella Buenos Aires Argentina"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Martin","family":"Sola","sequence":"additional","affiliation":[{"name":"Department of Economics Universidad Torcuato Di Tella Buenos Aires Argentina"},{"name":"School of Economics Mathematics and Statistics, Birkbeck College London UK"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Fabio","family":"Spagnolo","sequence":"additional","affiliation":[{"name":"Department of Economics and Finance Brunel University Uxbridge UK"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2014,6,26]]},"reference":[{"key":"e_1_2_8_2_1","doi-asserted-by":"publisher","DOI":"10.2307\/2938229"},{"key":"e_1_2_8_3_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0304-3932(03)00032-1"},{"key":"e_1_2_8_4_1","unstructured":"BandaraW MunclingerR.2012.Term structure modeling with structural breaks: a simple arbitrage\u2010free approach. 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