Employing Extended Kalman Filter in a Simple Macroeconomic Model.

In this study, the estimation power of Extended Kalman Filter is tested within a simple Keynesian macroeconomic model. After the model is written in a non-linear state space form, Extended Kalman Filter emerges as the appropriate methodology to estimate both state variables and the parameters. The simulation results suggest that such a methodology can also be employed in explaining more complex macroeconomic dynamics. [ABSTRACT FROM AUTHOR]