Summary
Transfer function models are here used to identify empirically economic dynamic systems. An iterative recursive instrumental variables estimator for transfer function estimation, originally suggested by Young [see, e.g., Young (1984)], is here applied in estimating structurally varying transfer function models describing leading indicator relations for business-cycle forecasting. A series of numerical examples clearly indicate the good capability of the estimator to discover parameter changes. At least for single-input models the estimator converges well enough toward the correct and time-varying parameter values within a few iterations, as soon as the signal-to-noise ratio is not too small.
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© 1991 Springer-Verlag Berlin Heidelberg
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Claesson, L., Westlund, A.H. (1991). On the Estimation of Time-varying Parameters in Transfer Function Models. In: Hackl, P., Westlund, A.H. (eds) Economic Structural Change. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-06824-3_19
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DOI: https://doi.org/10.1007/978-3-662-06824-3_19
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