scholarly journals State-Space Models on the Stiefel Manifold with a New Approach to Nonlinear Filtering

Econometrics ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 48
Author(s):  
Yukai Yang ◽  
Luc Bauwens
Keyword(s):  
State Space ◽  
Nonlinear Filtering ◽  
State Space Models ◽  
Stiefel Manifold ◽  
Dynamic Factor ◽  
New Approach ◽  
Vector Error Correction ◽  
Vector Error ◽  
Langevin Distribution ◽  
Vector Error Correction Models

We develop novel multivariate state-space models wherein the latent states evolve on the Stiefel manifold and follow a conditional matrix Langevin distribution. The latent states correspond to time-varying reduced rank parameter matrices, like the loadings in dynamic factor models and the parameters of cointegrating relations in vector error-correction models. The corresponding nonlinear filtering algorithms are developed and evaluated by means of simulation experiments.

scholarly journals Dynamic Relations of Consumer Prices: A Case Study of Recent Effects on the Japanese Headline CPI

2016 ◽  
Vol 3 (2) ◽  
pp. 28
Author(s):  
Chikashi Tsuji
Keyword(s):  
Impulse Response ◽  
Statistical Significance ◽  
Consumer Price Index ◽  
Variable Coefficients ◽  
Vector Error Correction ◽  
Vector Error ◽  
Consumer Prices ◽  
Dynamic Relations ◽  
Vector Error Correction Models

<p>This study attempts to empirically examine the relations between the headline consumer price index (CPI) and several other CPIs in Japan by applying the vector error correction models (VECMs). Our investigations derive the following interesting findings. First, we reveal that as to our four combinations of the CPIs tested in this paper, 1) all variable coefficients in the cointegrating equations are statistically significant in our VECM models and the statistical significance is very strong. Thus, we understand that our four bivariate combinations of the CPIs tested in this paper are all strongly cointegrated and the VECM approach is very effective to capture the time-series effects of the categorized CPIs on the Japanese headline CPI. Further, we also find that 2) as far as judging by the results of our impulse response analyses, for the period from May 2011 to June 2015, the headline CPI for Japan is weakly or little affected by the CPI of energy and the CPI of food for Japan. We further clarify that 3) according to the results of our impulse response analyses, the Japanese headline CPI is positively affected by both the CPI of utilities for Japan and the CPI of transportation and communication expenses for Japan.</p>

scholarly journals Leading properties of GDT auctions for dairy prices

2020 ◽  
Vol 122 (7) ◽  
pp. 2303-2328
Author(s):  
Jakub Olipra
Keyword(s):  
Milk Powder ◽  
Price Transmission ◽  
Price Expectations ◽  
Content Type ◽  
Vector Error Correction ◽  
Vector Error ◽  
Setting Process ◽  
Dairy Markets ◽  
The Us ◽  
Vector Error Correction Models

PurposeProfessionals from the dairy sector commonly believe that the results of Global Dairy Trade (GDT) auctions are a good leading indicator for prices of dairy commodities. The purpose of this paper is to test that hypothesis for prices of key dairy commodities (skimmed milk powder (SMP), whole milk powder (WMP), butter and cheddar) in the main dairy markets (the US, EU and Oceania).Design/methodology/approachThe leading properties of the GDT auctions are investigated using vector error correction models (VECM).FindingsThe results show that prices at GDT auctions may be treated as a benchmark for global prices of WMP and SMP as they affect prices in all considered markets. However, in case of EU market the relationship with the GDT is bidirectional. GDT prices reveal some leading properties also in cheddar market, however price relationships in this market are much more complex. In case of butter market, GDT can be regarded as a benchmark only for Oceania.Practical implicationsThe results of this paper improve knowledge on price transmission in dairy markets, show the role of the GDT auctions in the price setting process, and thus may help professionals from the dairy sector to formulate their price expectations more precisely.Originality/valueDespite the fact that many professionals from the dairy sector treat GDT auctions as a benchmark, so far their leading properties have not been scientifically proven.

scholarly journals Stochastic model specification in Markov switching vector error correction models

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Niko Hauzenberger ◽  
Florian Huber ◽  
Michael Pfarrhofer ◽  
Thomas O. Zörner
Keyword(s):  
Stochastic Model ◽  
Error Correction ◽  
Real Time ◽  
Euro Area ◽  
Model Specification ◽  
Vector Error Correction ◽  
Vector Error ◽  
Common Distribution ◽  
Vector Error Correction Models ◽  
Shrinkage Priors

AbstractThis paper proposes a hierarchical modeling approach to perform stochastic model specification in Markov switching vector error correction models. We assume that a common distribution gives rise to the regime-specific regression coefficients. The mean as well as the variances of this distribution are treated as fully stochastic and suitable shrinkage priors are used. These shrinkage priors enable to assess which coefficients differ across regimes in a flexible manner. In the case of similar coefficients, our model pushes the respective regions of the parameter space towards the common distribution. This allows for selecting a parsimonious model while still maintaining sufficient flexibility to control for sudden shifts in the parameters, if necessary. We apply our modeling approach to real-time Euro area data and assume transition probabilities between expansionary and recessionary regimes to be driven by the cointegration errors. The results suggest that the regime allocation is governed by a subset of short-run adjustment coefficients and regime-specific variance-covariance matrices. These findings are complemented by an out-of-sample forecast exercise, illustrating the advantages of the model for predicting Euro area inflation in real time.

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