Kalman Filter. Rewriting to State Space

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camillas
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Joined: Fri Feb 19, 2016 3:40 pm

Kalman Filter. Rewriting to State Space

Postby camillas » Fri Feb 19, 2016 3:58 pm

Hi. I am trying to estimate the output gap/potential output using a Kalman filter following Fuentes (2007) .
I need to convert the eqautions to a state space model so I can implement it in Eviews.
The first part is the basics which is attached as Picture 1 and I have formulated it as:
@signal gdp = potential + gap
@state potential = potential(-1) + potential2(-1) + gap(-1) +[var=exp(c(1))]
@state potential2 = potential2(-1) + [var=exp(c(2))]
@state gap = c(4)*gap2(-1) + [var=exp(c(3))]
@state gap2 = gap(-1)

But now I want to add the Phillips curve and an IS curve as in Picture 2, but I am not exactly sure how to rewrite it to the state space model so I can implement it.

I hope someone can help.
Kindly regards :)
Attachments
Picture2.png
The Phillips curve and IS curve
Picture2.png (10.13 KiB) Viewed 2065 times
Picture1.png
The basic equations
Picture1.png (2.88 KiB) Viewed 2065 times

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