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Employing Extended Kalman Filter in a Simple Macroeconomic Model

Author

Listed:
  • Levent Ozbek
  • Umit Ozlale
  • Fikri Ozturk

Abstract

In this study, the estimation power of Extended Kalman Filter is tested within a simple Keynesian macroeconomic model. After the model is written in a non-linear state space form, Extended Kalman Filter emerges as the appropriate methodology to estimate both state variables and the parameters. The simulation results suggest that such a methodology can also be employed in explaining more complex macroeconomic dynamics.

Suggested Citation

  • Levent Ozbek & Umit Ozlale & Fikri Ozturk, 2003. "Employing Extended Kalman Filter in a Simple Macroeconomic Model," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 3(1), pages 53-65.
    • Handle: RePEc:tcb:cebare:v:3:y:2003:i:1:p:53-65
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2003/Volume+3-1/
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    References listed on IDEAS

    as
    1. Harvey,Andrew C., 1991. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521405737, January.
    2. Bacchetta, Philippe & Gerlach, Stefan, 1997. "Consumption and credit constraints: International evidence," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 207-238, October.
    3. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    4. Grillenzoni, Carlo, 1993. "ARIMA Processes with ARIMA Parameters," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 235-250, April.
    5. Tanizaki, Hisashi & Mariano, Roberto S., 1998. "Nonlinear and non-Gaussian state-space modeling with Monte Carlo simulations," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 263-290.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Yüksel, Ebru & Metin-Ozcan, Kivilcim & Hatipoglu, Ozan, 2013. "A survey on time-varying parameter Taylor rule: A model modified with interest rate pass-through," Economic Systems, Elsevier, vol. 37(1), pages 122-134.

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    More about this item

    Keywords

    Extended Kalman Filter;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions

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