Dear Gretl Community,<div><br></div><div>I trying to estimate a time-varying parameter model (TVP) using the Kalman filter but I&#39;m getting no success :( The model is a TVP Phillips curve for Brazilian inflation augmented with the trade openness (my sample has 103 observations):</div>


<div><br></div><div>inf_f = b1(t)*inf(-1) + b2(t)*exp12m + b3(t)*gap(-1) + b4(t)*trade(-1) + w(t)</div><div><br></div><div>b1(t) = b1(t-1) + v1(t)</div><div>b2(t) = b2(t-1) + v2(t)</div><div>b3(t) = b3(t-1) + v3(t)</div>

<div>
b4(t) = b4(t-1) + v4(t)</div><div><br></div><div>Where:</div><blockquote style="margin:0 0 0 40px;border:none;padding:0px"><div>inf_f - non monitored prices</div><div>exp12m - 12 month expected inflation</div>
<div>gap - output gap</div><div>trade - trade openness</div></blockquote><div><br></div><div>Based upon equations (26.1) and (26.2) from the Gretl User&#39;s Guide (p. 216) I&#39;m trying to setup the filter. Please take a look at the following commands:</div>


<div><font face="&#39;trebuchet ms&#39;, sans-serif"><br></font></div><div><font face="&#39;courier new&#39;, monospace">list regressors = inf exp12m gap trade</font></div>
<div><font face="&#39;courier new&#39;, monospace"><br></font></div><div><div><font face="&#39;courier new&#39;, monospace">matrix y = {inf_f}       # Matrix order:(Txn)=(103x1)</font></div>
<div><font face="&#39;courier new&#39;, monospace">matrix H = <b>?</b>             # Matrix order:(rxn)=(4x1)</font></div><div><font face="&#39;courier new&#39;, monospace">matrix x = {regressors}  # Matrix order:(Txk)=(103x4)</font></div>


<div><font face="&#39;courier new&#39;, monospace">matrix F = I(4)          # Matrix order:(rxr)=(4x4)</font></div><div><font face="&#39;courier new&#39;, monospace">matrix Q = <b>?</b>             # </font><span style="font-family:&#39;courier new&#39;, monospace">Matrix order:(rxr)=</span><span style="font-family:&#39;courier new&#39;, monospace">(4x4)</span></div>


</div><div><br></div><div>How can I define H and Q?</div><div><br></div><div>Best,<br>-- <br><b><font face="tahoma, sans-serif">Henrique C. de Andrade</font></b><font face="tahoma, sans-serif"><br>Doutorando em Economia Aplicada<br>


Universidade Federal do Rio Grande do Sul<br><a href="http://www.ufrgs.br/ppge" target="_blank">www.ufrgs.br/ppge</a></font><br>
</div>