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Atlanta Fed Working Papers


Using the Kalman Filter to Smooth the Shocks of a Dynamic Stochastic General Equilibrium Model

Andy Bauer, Nicolas Haltom, and Juan Francisco Rubio-Ramírez
Working Paper 2003-32
December 2003

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This paper shows how to use the Kalman filter (Kalman 1960) to back out the shocks of a dynamic stochastic general equilibrium model. In particular, we use the smoothing algorithm as described in Hamilton (1994) to estimate the shocks of a sticky-prices and sticky-wages model using all the information up to the end of the sample.

JEL classification: C63, C68, E37

Keywords: dynamic equilibrium economies, the Kalman filter, smoothing


The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility. Please address questions regarding content to Andy Bauer, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, NE, Atlanta, GA 30309, 404-498-7906, andy.bauer@atl.frb.org, Nicholas Haltom, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, NE, Atlanta, GA 30309, 404-498-8939, nicholas.haltom@atl.frb.org, or Juan Francisco Rubio-Ramírez, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, NE, Atlanta, GA 30309, 404-498-8057, juan.rubio@atl.frb.org.

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