The Iterative Kalman Filter Smoother and Its Applications
Osvald Vašíček, Jan Vlček · Bulletin of the Czech Econometric Society · 2002
The Iterative Kalman filter Smoother (IKFS) is the method for estimation of initial states and parameters of models in the state space form. This estimation procedure is described in the paper along with its basic properties. Its main advantage stems from the fact that it only consists of several runs of Kalman filter, which is well-known and highly used estimation procedure in economic modeling. The procedure of Iterative Kalman filter Smoother is then used to estimate the equilibrium paths of unobserved macroeconomic variables, equilibrium real effective exchange rate and equilibrium of real interest rate. The above-mentioned application is an example how Iterative Kalman filter Smoother is employed to identify unobserved states and time-varying parameters simultaneously.