State space model

Discussion of State Space and Dynamic Stochastic General Equilibrium Models
nkxl

State space model

Unread post by nkxl »

I want to estimate the following model with Kalman filter:

Y(t)=X(t)+v(t)
X(t)=a+b*X(t-1)+w(t).

In RATS, the state equition doesn't have the intercept a. My question is how to deal with the intercept a in the state equation in RATS form: X(t)=c'X(t-1)+w(t)?

Many thanks
TomDoan
Posts: 7814
Joined: Wed Nov 01, 2006 4:36 pm

Unread post by TomDoan »

The Z option on DLM is used for shifts in the state equation like this
nkxl

Unread post by nkxl »

Thanks a lot!
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