## State Space modelling

For technical questions regarding estimation of single equations, systems, VARs, Factor analysis and State Space Models in EViews. General econometric questions and advice should go in the Econometric Discussions forum.

Moderators: EViews Gareth, EViews Moderator

linluoau
Posts: 3
Joined: Fri Apr 26, 2019 4:06 am

### State Space modelling

Hi All
I want to estimate nairu with a state space model. The model is specified as
sspace ssnairu
ssnairu.append cpi = c(11)*cpie+c(12)*cpi(-1)+c(13)*cpi(-2)+c(14)*cpi(-3)+c(15)*ulc(-1)+c(16)*((rue-nairu)/rue)+c(17)*d(rue(-1))/rue+c(18)*(pm(-1)-pm(-2))+[var=exp(c(110))]
ssnairu.append ulc = c(21)*cpie+c(22)*cpi(-1)+c(23)*cpi(-2)+c(24)*((rue-nairu)/rue)+c(25)*d(rue(-1))/rue+[var=exp(c(26))]
ssnairu.append @state nairu =nairu(-1) +[var=exp(c(31))]

nairu is specified as a random walk. cpi is inflation, cpie is expected inflation, ulc is unit of labour cost, rue is the unemployment rate and pm is the import price.
No matter how hard I tried, the results don't converge. I tried to change initial values and optimisation methods, but no luck. A typical output is like:
Sspace: SSNAIRU
Method: Maximum likelihood (BFGS / Marquardt steps)
Date: 05/27/19 Time: 16:44
Sample: 12/01/1989 12/01/2018
Included observations: 117
Valid observations: 111
Partial observations: 1
Failure to improve likelihood (singular hessian) after 53 iterations
Coefficient covariance computed using outer product of gradients

Coefficient Std. Error z-Statistic Prob.

C(11) 0.195415 0.069796 2.799818 0.0051
C(12) 0.915364 0.077235 11.85171 0.0000
C(13) 0.110645 0.084827 1.304353 0.1921
C(14) -0.221659 0.073781 -3.004306 0.0027
C(15) -0.059256 0.037787 -1.568167 0.1168
C(16) -3.67E-09 0.212305 -1.73E-08 1.0000
C(17) -3.087926 2.558954 -1.206714 0.2275
C(18) 5.82E-05 0.016426 0.003542 0.9972
C(21) 0.416121 0.226537 1.836880 0.0662
C(22) -0.664531 0.298286 -2.227835 0.0259
C(23) 1.005604 0.377144 2.666368 0.0077
C(24) 3.56E-07 0.446858 7.97E-07 1.0000
C(25) 8.743475 7.308450 1.196352 0.2316
C(26) 1.410590 0.185800 7.591991 0.0000
C(31) 0.469357 6.42E+10 7.31E-12 1.0000
C(110) -1.289094 0.124707 -10.33697 0.0000

Final State Root MSE z-Statistic Prob.

NAIRU 0.057820 2024.489 2.86E-05 1.0000

Log likelihood -320.9730 Akaike info criterion 6.071585
Parameters 16 Schwarz criterion 6.462148
Diffuse priors 1 Hannan-Quinn criter. 6.230025

Many thanks
Linden

saranya
Posts: 38
Joined: Wed Nov 16, 2016 5:51 am

### Re: State Space modelling

Try changing the estimation sample period

saranya
Posts: 38
Joined: Wed Nov 16, 2016 5:51 am

### Re: State Space modelling

you can also try adding a covariance matrix using @vprior