Filtering with Limited Information

Thorsten Drautzburg (), Jesus Fernandez-Villaverde, Pablo Guerron-Quintana () and Dick Oosthuizen ()
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Thorsten Drautzburg: Federal Reserve Bank of Philadelphia
Pablo Guerron-Quintana: Boston College and ESPOL
Dick Oosthuizen: University of Pennsylvania

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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)
Pages: 59 pages
Date: 2024-07-19
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-ets
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https://economics.sas.upenn.edu/system/files/worki ... per%20Submission.pdf (application/pdf)

Related works:
Working Paper: Filtering with Limited Information (2024)
Working Paper: Filtering with Limited Information (2024)
Working Paper: Filtering with Limited Information (2024)
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