Chan, Joshua and Strachan, Rodney (2012): Estimation in Non-Linear Non-Gaussian State Space Models with Precision-Based Methods.
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In recent years state space models, particularly the linear Gaussian version, have become the standard framework for analyzing macro-economic and financial data. However, many theoretically motivated models imply non-linear or non-Gaussian specifications or both. Existing methods for estimating such models are computationally intensive, and often cannot be applied to models with more than a few states. Building upon recent developments in precision-based algorithms, we propose a general approach to estimating high-dimensional non-linear non-Gaussian state space models. The baseline algorithm approximates the conditional distribution of the states by a multivariate Gaussian or t density, which is then used for posterior simulation. We further develop this baseline algorithm to construct more sophisticated samplers with attractive properties: one based on the accept-reject Metropolis-Hastings (ARMH) algorithm, and another adaptive collapsed sampler inspired by the cross-entropy method. To illustrate the proposed approach, we investigate the effect of the zero lower bound of interest rate on monetary transmission mechanism.
|Item Type:||MPRA Paper|
|Original Title:||Estimation in Non-Linear Non-Gaussian State Space Models with Precision-Based Methods|
|Keywords:||integrated likelihood; accept-reject Metropolis-Hastings; cross-entropy; liquidity trap; zero lower bound|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General
|Depositing User:||Joshua Chan|
|Date Deposited:||10. Jun 2012 12:49|
|Last Modified:||14. Mar 2015 18:31|
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