[Gretl-users] Re: State space with three time-variant coefficients

On Thu, 7 Oct 2021, F.R.Costa wrote: Speaking from personal experience, the state-space approach to time-varying parameter models is often difficult in practice because for large-ish models the identification issues become quite relevant and maximising the loglikelihood is quite difficult (although the EM algorithm may help). There's an interesting non-parametric alternative that I find myself using quite often recently that was put forward by Giraitis, Kapetanios and several co-authors and is implemented in the gretl "ketvals" package. I'm attaching an example script which shows the two alternatives on some simulated data, where the simulated coefficients are smoothed versions of AR(1) processes. As you can see, both approaches reconstruct the histories for both coefficients relatively well, but the non-parametric approach is much faster. ------------------------------------------------------- Riccardo (Jack) Lucchetti Dipartimento di Scienze Economiche e Sociali (DiSES) Università Politecnica delle Marche (formerly known as Università di Ancona) r.lucchetti(a)univpm.it http://www2.econ.univpm.it/servizi/hpp/lucchetti -------------------------------------------------------