Table of Contents

Handbook of Research Methods and Applications in Empirical Macroeconomics

Handbook of Research Methods and Applications in Empirical Macroeconomics

Handbooks of Research Methods and Applications series

Edited by Nigar Hashimzade and Michael A. Thornton

This comprehensive Handbook presents the current state of art in the theory and methodology of macroeconomic data analysis. It is intended as a reference for graduate students and researchers interested in exploring new methodologies, but can also be employed as a graduate text. The Handbook concentrates on the most important issues, models and techniques for research in macroeconomics, and highlights the core methodologies and their empirical application in an accessible manner. Each chapter is largely self-contained, whilst the comprehensive introduction provides an overview of the key statistical concepts and methods. All of the chapters include the essential references for each topic and provide a sound guide for further reading.

Chapter 15: Maximum likelihood estimation of time series models: the Kalman filter and beyond

Tommaso Proietti and Alessandra Luati

Subjects: economics and finance, econometrics, research methods, research methods in economics


The purpose of this chapter is to provide a comprehensive treatment of likelihood inference for state space models. These are a class of time series models relating an observable time series to quantities called states, which are characterized by a simple temporal dependence structure, typically a first order Markov process. The states sometimes have substantial interpretation. Key estimation problems in economics concern latent variables, such as the output gap, potential output, the nonaccelerating inflation rate of unemployment, or NAIRU, core inflation, and so forth. Time-varying volatility, which is quintessential to finance, is also an important feature in macroeconomics. In the multivariate framework relevant features can be common to different series, meaning that the driving forces of a particular feature and/or the transmission mechanism are the same.

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