The RATS Software Forum

Hi,

I am trying to use kalman filter (KF) for the cointegration relation and for alpha in VECM. I have purchased a copy of CATS v2 and RATS v8.01. I have studied the manuals for both and there were no mention of kalman filter in the CATS manual. there was a major section of KF in RATS manual but no mention how it could beinserted into VECM. Does anyone has the code for this or how to go about doing it? I need it for my thesis and appreciate all help. Many thanks in advance.

Des

You can't find that because you can't do that with the Kalman filter. If you fix the cointegating vector, you can Kalman filter over the rest of the model (short-run dynamics and loadings on the CI) since, given beta, the model is linear. However, the beta itself has to be estimated by a reduced rank regression which can't be done using a simple recursion like the KF. CATS includes recursive analysis for cointegration which is done by re-estimating the model for different ranges, as is described for other types of non-linear models in section 11.2 of the version 8 User's Guide.