A Note on Optimal Linear Filtering, Smoothing and Trend Extraction for Processes with Unit Roots with Drift
3 Pages Posted: 28 Mar 2008 Last revised: 14 Jun 2008
Date Written: March 28, 2008
In this note I show that the method proposed in Thomakos (2008) for optimal linear filtering, smoothing and trend extraction for a unit root process can be applied with no changes when a drift parameter is added to the process. The method in the aforementioned paper is based on Singular Spectrum Analysis (SSA) and here I also derive an SSA-based consistent estimator of the drift parameter.
Keywords: drift, linear filtering, singular spectrum analysis, smoothing, trend extraction and prediction, unit root
JEL Classification: C13, C14, C22, C32, C53
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