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Bayesian Inference on Dynamic Models with Latent Factors

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Author Info
Monica Billio () (Department of Economics, University Of Venice Cà Foscari)
Roberto Casarin (University of Brescia)
Domenico Sartore (Department of Economics, University Of Venice Cà Foscari)

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Abstract

In time series analysis, latent factors are often introduced to model the heterogeneous time evolution of the observed processes. The presence of unobserved components makes the maximum likelihood estimation method more difficult to apply. A Bayesian approach can sometimes be preferable since it permits to treat general state space models and makes easier the simulation based approach to parameters estimation and latent factors filtering. The paper examines economic time series models in a Bayesian perspective focusing, through some examples, on the extraction of the business cycle components. We briefly review some general univariate Bayesian dynamic models and discuss the simulation based techniques, such as Gibbs sampling, adaptive importance sampling and finally suggest the use of the particle filter, for parameter estimation and latent factor extraction.

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Publisher Info
Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number 2007_34.

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Length: 20
Date of creation: 2007
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Handle: RePEc:ven:wpaper:2007_34

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Related research
Keywords: Bayesian Dynamic Models; Simulation Based Inference; Particle Filters; Latent Factors; Business Cycle;

Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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  1. Monica Billio & Roberto Casarin, 2008. "Identifying Business Cycle Turning Points with Sequential Monte Carlo Methods," Working Papers 0815, University of Brescia, Department of Economics. [Downloadable!]
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