Efficient simulation and integrated likelihood estimation in state space models (Q2655891)

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Efficient simulation and integrated likelihood estimation in state space models
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    Efficient simulation and integrated likelihood estimation in state space models (English)
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    26 January 2010
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    Summary: We consider the problem of implementing simple and efficient Markov chain Monte Carlo (MCMC) estimation algorithms for state space models. A conceptually transparent derivation of the posterior distribution of the states is discussed, which also leads to an efficient simulation algorithm that is modular, scalable and widely applicable. We also discuss a simple approach for evaluating the integrated likelihood, defined as the density of the data given the parameters but marginal of the state vector. We show that this high-dimensional integral can be easily evaluated with minimal computational and conceptual difficulty. Two empirical applications in macroeconomics demonstrate that the methods are versatile and computationally undemanding. In one application, involving a time-varying parameter model, we show that the methods allow for efficient handling of large state vectors. In our second application, involving a dynamic factor model, we introduce a new blocking strategy which results in improved MCMC mixing at little cost. The results demonstrate that the framework is simple, flexible and efficient.
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    banded matrix
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    Bayesian estimation
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    collapsed sampler
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    Markov chain Monte Carlo
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    Kalman filter
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    state smoothing
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    dynamic factor model
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    time-varying parameter model
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    numerical examples
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    algorithms
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    macroeconomics
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