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A Note on Particle Filters Applied to DSGE Models


  • Angelo Marsiglia Fasolo


This paper compares the properties of two particle filters – the Bootstrap Filter and the Auxiliary Particle Filter – applied to the computation of the likelihood of artificial data simulated from a basic DSGE model with nominal and real rigidities. Particle filters are compared in terms of speed, quality of the approximation of the probability density function of data and tracking of state variables. Results show that there is a case for the use of the Auxiliary Particle Filter only when the researcher uses a large number of observable variables and the number of particles used to characterize the likelihood is relatively low. Simulations also show that the largest gains in tracking state variables in the model are found when the number of particles is between 20,000 and 30,000, suggesting a boundary for this number.

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  • Angelo Marsiglia Fasolo, 2012. "A Note on Particle Filters Applied to DSGE Models," Working Papers Series 281, Central Bank of Brazil, Research Department.
  • Handle: RePEc:bcb:wpaper:281

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    References listed on IDEAS

    1. Correa, Arnildo & Marins, Jaqueline & Neves, Myrian & da Silva, Antonio Carlos, 2014. "Credit Default and Business Cycles: An Empirical Investigation of Brazilian Retail Loans," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 68(3), September.
    2. Tabak, Benjamin M. & Fazio, Dimas M. & Cajueiro, Daniel O., 2012. "The relationship between banking market competition and risk-taking: Do size and capitalization matter?," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3366-3381.
    3. Sergio A. Lago Alves, 2012. "Trend Inflation and the Unemployment Volatility Puzzle," Working Papers Series 277, Central Bank of Brazil, Research Department.
    4. Marta Areosa & Waldyr Areosa & Vinicius Carrasco, 2010. "A Sticky-Dispersed Information Phillips Curve: A model with partial and delayed information," Textos para discussão 565, Department of Economics PUC-Rio (Brazil).
    5. Pierre-Richard Agénor & K. Alper & L. Pereira da Silva, 2012. "Sudden Floods, Prudential Regulation and Stability in an Open Economy," Working Papers Series 267, Central Bank of Brazil, Research Department.
    6. Eduardo Luis Lundberg, 2011. "Bancos Oficiais e Crédito Direcionado – o que diferencia o mercado de crédito brasileiro?," Working Papers Series 258, Central Bank of Brazil, Research Department.
    7. Fabia A. de Carvalho, 2012. "Uma Breve Análise de Medidas Alternativas à Mediana na Pesquisa de Expectativas de Inflação do Banco Central do Brasil," Working Papers Series 264, Central Bank of Brazil, Research Department.
    8. José Renato Haas Ornelas & José Santiago Fajardo Barbachan & Aquiles Rocha de Farias, 2012. "Estimating Relative Risk Aversion, Risk-Neutral and Real-World Densities using Brazilian Real Currency Options," Working Papers Series 269, Central Bank of Brazil, Research Department.
    9. Agénor, Pierre-Richard & Pereira da Silva, Luiz A., 2014. "Macroprudential regulation and the monetary transmission mechanism," Journal of Financial Stability, Elsevier, vol. 13(C), pages 44-63.
    10. Tabak, Benjamin M. & Miranda, Rogério Boueri & Fazio, Dimas M., 2013. "A geographically weighted approach to measuring efficiency in panel data: The case of US saving banks," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3747-3756.
    11. Flury, Thomas & Shephard, Neil, 2011. "Bayesian Inference Based Only On Simulated Likelihood: Particle Filter Analysis Of Dynamic Economic Models," Econometric Theory, Cambridge University Press, vol. 27(05), pages 933-956, October.
    12. Leonardo S. Alencar, 2011. "Um Exame sobre como os Bancos Ajustam seu Índice de Basileia no Brasil," Working Papers Series 251, Central Bank of Brazil, Research Department.
    13. Angelo M. Fasolo, 2011. "The Accuracy of Perturbation Methods to Solve Small Open Economy Models," Working Papers Series 262, Central Bank of Brazil, Research Department.
    14. Lycia M. G. Araujo & Guilherme M. R. Gomes & Solange M. Guerra & Benjamin M. Tabak, 2011. "Comparação da Eficiência de Custo para BRICs e América Latina," Working Papers Series 252, Central Bank of Brazil, Research Department.
    15. Vicente da Gama Machado, 2012. "Monetary Policy, Asset Prices and Adaptive Learning," Working Papers Series 274, Central Bank of Brazil, Research Department.
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    Cited by:

    1. Bruno Martins, 2012. "Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market," Working Papers Series 299, Central Bank of Brazil, Research Department.
    2. Grazzini, Jakob & Richiardi, Matteo, 2015. "Estimation of ergodic agent-based models by simulated minimum distance," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 148-165.
    3. Papadimitriou, Theophilos & Gogas, Periklis & Tabak, Benjamin M., 2013. "Complex networks and banking systems supervision," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4429-4434.
    4. Waldyr Areosa & Marta Areosa, 2012. "Information (in) Chains: information transmission through production chains," Working Papers Series 286, Central Bank of Brazil, Research Department.

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