Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210077
Authors: 
Binning, Andrew
Maih, Junior
Year of Publication: 
2015
Series/Report no.: 
Working Paper No. 10/2015
Abstract: 
In this paper we take three well known Sigma Point Filters, namely the Unscented Kalman Filter, the Divided Difference Filter, and the Cubature Kalman Filter, and extend them to allow for a very general class of dynamic nonlinear regime switching models. Using both a Monte Carlo study and real data, we investigate the properties of our proposed filters by using a regime switching DSGE model solved using nonlinear methods. We find that the proposed filters perform well. They are both fast and reasonably accurate, and as a result they will provide practitioners with a convenient alternative to Sequential Monte Carlo methods. We also investigate the concept of observability and its implications in the context of the nonlinear filters developed and propose some heuristics. Finally, we provide in the RISE toolbox, the codes implementing these three novel filters.
Subjects: 
non-linear DSGE estimation
regime-switching
higher-order perturbation
sigma point filters
observability
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-867-1
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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