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Introducing sspaneltvp: a code to estimating state-space time varying parameter models in panels. An application to Okun’s law

Author

Listed:
  • Mariam Camarero

    (Economics Department. University Jaume I)

  • Juan Sapena

    (Economics and Business Department. Catholic University of Valencia)

  • Cecilio Tamarit

    (Applied Economics II Department. University of Valencia)

Abstract

This paper introduces a new code that provides researchers with a complete toolbox for estimating state-space time-varying parameter models. Our proposal extends the simple seminal framework into a panel-data one, combining both fixed (either common or countryspecific) and varying components. Under specific conditions, this setting becomes a meanreverting model, where the mean fixed parameter may include a deterministic trend. Regarding the transition equation, we allow for estimating different autoregressive alternatives and control instruments in the transition equation, whose coefficients can be set up either common or idiosyncratic (this is particularly interesting for detecting asymmetries among individuals (countries) to common shocks. Furthermore, the code written in GAUSS allows for introducing restrictions regarding the variances of both the transition and measurement equations. Finally, we perform an empirical application to explore Okun’s Law for a panel of EU peripheral countries during the period 1965-2021.

Suggested Citation

  • Mariam Camarero & Juan Sapena & Cecilio Tamarit, 2024. "Introducing sspaneltvp: a code to estimating state-space time varying parameter models in panels. An application to Okun’s law," Working Papers 2405, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:2405
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    References listed on IDEAS

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    More about this item

    Keywords

    State Space models; Kalman Filter; Time-varying parameters; Okun’s law;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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