Bayesian Inference in Dynamic Models with Latent Factors

Monography of Official Statistics, Forthcoming

Posted: 21 Jan 2005

See all articles by Monica Billio

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Domenico Sartore

Ca Foscari University of Venice - Dipartimento di Economia

Abstract

In time series analysis, latent factors are often introduced to model the heterogeneous time evolution of the observed processes. The presence of unobserved components makes the maximum likelihood estimation method more difficult to apply. A Bayesian approach can sometimes be preferable since it permits to treat general state space models and makes easier the simulation based approach to parameters estimation and latent factors filtering. The paper examines economic time series models in a Bayesian perspective focusing, through some examples, on the extraction of the business cycle components. We briefly review some general univariate Bayesian dynamic models and discuss the simulation based techniques, such as Gibbs sampling, adaptive importance sampling and finally suggest the use of the particle filter, for parameter estimation and latent factor extraction.

Keywords: Bayesian dynamic models, simulation based inference, particle filters, latent factors, business cycle

JEL Classification: C11, C15, C22, C63, O40

Suggested Citation

Billio, Monica and Casarin, Roberto and Sartore, Domenico, Bayesian Inference in Dynamic Models with Latent Factors. Monography of Official Statistics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=651642

Monica Billio (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics ( email )

San Giobbe 873/b
Venice, 30121
Italy
+39 030.298.91.49 (Phone)
+39 030.298.88.37 (Fax)

HOME PAGE: http://venus.unive.it/r.casarin/

Domenico Sartore

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

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