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Filtering with Limited Information

Thorsten Drautzburg, Jesus Fernandez-Villaverde, Pablo Guerrón-Quintana and Dick Oosthuizen

No 11243, CESifo Working Paper Series from CESifo

Abstract: We propose a new tool to filter non-linear dynamic models that does not require the researcher to specify the model fully and can be implemented without solving the model. If two conditions are satisfied, we can use a flexible statistical model and a known measurement equation to back out the hidden states of the dynamic model. The first condition is that the state is sufficiently volatile or persistent to be recoverable. The second condition requires the possibly non-linear measurement to be sufficiently smooth and to map uniquely to the state absent measurement error. We illustrate the method through various simulation studies and an empirical application to a sudden stops model applied to Mexican data.

Keywords: filtering; limited information; non-linear model; dynamic equilibrium model; sudden stops (search for similar items in EconPapers)
JEL-codes: C32 C53 E37 E44 O11 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-dge
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Working Paper: Filtering with Limited Information (2024) Downloads
Working Paper: Filtering with Limited Information (2024) Downloads
Working Paper: Filtering with Limited Information (2024) Downloads
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