Inequality Constrained State Space Models

Hang Qian

MPRA Paper from University Library of Munich, Germany

Abstract: The standard Kalman filter cannot handle inequality constraints imposed on the state variables, as state truncation induces a non-linear and non-Gaussian model. We propose a Rao-Blackwellised particle filter with the optimal importance function for forward filtering and the likelihood function evaluation. The particle filter effectively enforces the state constraints when the Kalman filter violates them. We find substantial Monte Carlo variance reduction by using the optimal importance function and Rao-Blackwellisation, in which the Gaussian linear sub-structure is exploited at both the cross-sectional and temporal levels.

Keywords: Rao-Blackwellisation; Kalman filter; Particle filter; Sequential Monte Carlo (search for similar items in EconPapers)
JEL-codes: C32 C53 (search for similar items in EconPapers)
Date: 2015-09-03
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66447

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