Estimation in Non-Linear Non-Gaussian State Space Models with Precision-Based Methods
AbstractIn 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 â€“ 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: on based on the acceptâ€”reject Metropolis-Hastings (ARHM) 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.
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Bibliographic InfoPaper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-13.
Length: 39 pages
Date of creation: Mar 2012
Date of revision:
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Other versions of this item:
- Chan, Joshua & Strachan, Rodney, 2012. "Estimation in Non-Linear Non-Gaussian State Space Models with Precision-Based Methods," MPRA Paper 39360, University Library of Munich, Germany.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
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