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Home | News | Paper by Rutger-Jan Lange published in the Journal of Econometrics
News | June 28, 2024

Paper by Rutger-Jan Lange published in the Journal of Econometrics

The paper 'Bellman filtering and smoothing for state–space modelsby research fellow Rutger-Jan Lange (Erasmus University Rotterdam) was published in the Journal of Econometrics (Volume 238, Issue 2).

Paper by Rutger-Jan Lange published in the Journal of Econometrics
Abstract

This paper presents a new filter for state–space models based on Bellman’s dynamic-programming principle, allowing for nonlinearity, non-Gaussianity and degeneracy in the observation and/or state-transition equations. The resulting Bellman filter is a direct generalisation of the (iterated and extended) Kalman filter, enabling scalability to higher dimensions while remaining computationally inexpensive. It can also be extended to enable smoothing. Under suitable conditions, the Bellman-filtered states are stable over time and contractive towards a region around the true state at every time step. Static (hyper)parameters are estimated by maximising a filter-implied pseudo log-likelihood decomposition. In univariate simulation studies, the Bellman filter performs on par with state-of-the-art simulation-based techniques at a fraction of the computational cost. In two empirical applications, involving up to 150 spatial dimensions or highly degenerate/nonlinear state dynamics, the Bellman filter outperforms competing methods in both accuracy and speed.

Article citation

Rutger-Jan Lange, Bellman filtering and smoothing for state–space modelsJournal of Econometrics, Volume 238, Issue 2, January 2024, doi.org/10.1016/j.jeconom.2023.105632.