Predictability, Real Time Estimation, and the Formulation of Unobserved Components Models

Tommaso Proietti

No 455, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: The formulation of unobserved components models raises some relevant interpretative issues, owing to the existence of alternative observationally equivalent specifications, differing for the timing of the disturbances and their covariance matrix. We illustrate them with reference to unobserved components models with ARMA(m;m) reduced form, performing the decomposition of the series into an ARMA(m; q) signal, q m, and a noise component. We provide a characterization of the set of covariance structures that are observationally equivalent, when the models are formulated both in the future and the contemporaneous forms. Hence, we show that, while the point predictions and the contemporaneous real time estimates are invariant to the specification of the disturbances covariance matrix, the reliability cannot be identified, except for special cases requiring q

Keywords: ARMA models; Steady State Kalman filter; Correlated Components; Nonfundamentalness (search for similar items in EconPapers)
JEL-codes: C22 C51 C53 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2019-03-22, Revised 2019-03-22
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ceistorvergata.it/RePEc/rpaper/RP455.pdf Main text (application/pdf)

Related works:
Journal Article: Predictability, real time estimation, and the formulation of unobserved components models (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rtv:ceisrp:455

Ordering information: This working paper can be ordered from
CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
https://ceistorvergata.it

Access Statistics for this paper

More papers in CEIS Research Paper from Tor Vergata University, CEIS CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma. Contact information at EDIRC.
Bibliographic data for series maintained by Barbara Piazzi ().