1. Modelling Time-Varying Parameters in Panel Data State-Space Frameworks: An Application to the Feldstein–Horioka Puzzle
- Author
-
Mariam Camarero, Cecilio Tamarit, Juan Sapena, and The authors gratefully acknowledge the financial support from AEI/Ministerio de Economía, Industria y Competitividad (MINEIC) and FEDER Project ECO2017-83255-C3-3-P and the Generalitat Valenciana (PROMETEO/2018/102 and GV/2017/052). Authors are also indebted to the Chair 'Betelgeux' for a Sustainable Economic Development, for its specific funding of this research. This paper has been developed within the research thematic network ECO2016-81901-REDT financed by MINEIC. The usual disclaimer applies.
- Subjects
050208 finance ,common factors ,Computer science ,05 social sciences ,Economics, Econometrics and Finance (miscellaneous) ,Feldstein–Horioka puzzle ,Gauss ,panel unit root tests ,Computer Science Applications ,Empirical research ,Autoregressive model ,multiple structural breaks ,time varying parameters ,0502 economics and business ,Canonical model ,Econometrics ,State space ,Kalman filter ,050207 economics ,Time series ,Panel data - Abstract
This is a pre-print of an article published in Computational Economics. The final authenticated version is available online at: https://doi.org/10.1007/s10614-019-09879-x In this paper, we develop a very flexible and comprehensive state-space framework for modeling time series data. Our research extends the simple canonical model usually employed in the literature, into a panel-data time-varying parameters framework, combining fixed (both common and country-specific) and varying components. Under some specific circumstances, this setting can be understood as a mean-reverting panel time-series model, where the mean fixed parameter can, at the same time, include a deterministic trend. Regarding the transition equation, our structure allows for the estimation of different autoregressive alternatives, and include control instruments, whose coefficients can be set-up either common or idiosyncratic. This is particularly useful to detect asymmetries among individuals (countries) to common shocks. We develop a GAUSS code that allows for the introduction of restrictions regarding the variances of both the transition and measurement equations. Finally, we use this empirical framework to test for the Feldstein–Horioka puzzle in a 17-country panel. The results show its usefulness for solving complexities in macroeconomic empirical research.
- Published
- 2019