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Square Root Iterative Filter: Theory and Applications to Econometric Models

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  • Carlo Carraro
  • Domenico Sartore

Abstract

This paper provides a new algorithm for estimating state space dynamic models and, as an example, it considers the estimation of time-varying parameter models. The novel elements of the algorithm are: a simple, easily implementable, square root method which is shown to solve the numerical problems affecting the standard Kalman filter algorithm and the related information filter and smoothing algorithms;an iterative framework, where information and covariance filters and smoothing are sequentially run in order to estimate all the parameters of the model; four different algorithms to consistently estimate the distribution of the estimated parameters, which are described and then compared by performing appropriate Montecarlo experiments.

Suggested Citation

  • Carlo Carraro & Domenico Sartore, 1987. "Square Root Iterative Filter: Theory and Applications to Econometric Models," Annals of Economics and Statistics, GENES, issue 6-7, pages 435-459.
    • Handle: RePEc:adr:anecst:y:1987:i:6-7:p:435-459
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    Cited by:

    1. KARFAKIS Costas & SIDIROPOULOS Moïse & TRABELSI Jamel, 2010. "Testing for the Borrowed Credibility Hypothesis: Theory and Evidence from the French Disinflation Strategy," EcoMod2003 330700078, EcoMod.
    2. Monica Billio & Domenico Sartore & Carlo Toffano, 2000. "Combining forecasts: some results on exchange and interest rates," The European Journal of Finance, Taylor & Francis Journals, vol. 6(2), pages 126-145.
    3. Jacques Luzi & Jamel Trabelsi, 1992. "L'instabilité de la détermination du taux de change dans un modèle monétariste," Économie et Prévision, Programme National Persée, vol. 104(3), pages 73-85.
    4. Moise Sidiropoulos & Jamel Trabelsi & Costas Karfakis, 2005. "Has the 'franc fort' exchange rate policy affected the inflationary dynamics? Theory and new evidence," International Economic Journal, Taylor & Francis Journals, vol. 19(3), pages 379-395.

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