Browsing by Subject "Extended Kalman filter"

Now showing 1 - 4 of 4

Open Access
An alternative method to measure the likelihood of a financial crisis in an emerging market
(Elsevier BV, 2007) Özlale, Ü.; Özcan, K. M.
This paper utilizes an early warning system in order to measure the likelihood of a financial crisis in an emerging market economy. We introduce a methodology, where we can both obtain a likelihood series and analyze the time-varying effects of several macroeconomic variables on this likelihood. Since the issue is analyzed in a non-linear state space framework, the extended Kalman filter emerges as the optimal estimation algorithm. Taking the Turkish economy as our laboratory, the results indicate that both the derived likelihood measure and the estimated time-varying parameters are meaningful and can successfully explain the path that the Turkish economy had followed between 2000 and 2006. The estimated parameters also suggest that overvalued domestic currency, current account deficit and the increase in the default risk increase the likelihood of having an economic crisis in the economy. Overall, the findings in this paper suggest that the estimation methodology introduced in this paper can also be applied to other emerging market economies as well. © 2007 Elsevier B.V. All rights reserved.
Open Access
Analyzing time-varying effects of potential output growth shocks
(Elsevier BV, 2008) Özlale, Ü.; Özbek, L.
Employing a state space model, we find for the United States economy that potential output growth rate can deviate from its steady state level for substantially long periods. (c) 2007 Elsevier B.V. All rights reserved.
Open Access
Coordination between monetary policy and fiscal policy for an inflation targeting emerging market
(Pergamon Press, 2010) Aktas, Z.; Kaya, N.; Özlale, Ü.
Several studies including Blanchard (2004) and Favero and Giavazzi (2004) imply that in emerging market economies, a tight monetary policy within an inflation-targeting framework could actually increase the price level due to the lack of fiscal discipline and the associated high risk premium. We extend their arguments in two ways. First, we introduce a semi structural model with time-varying parameters, where the risk premium is 'unobserved' and it is derived within the system. Such an approach fits better with the volatile nature of emerging market economies by allowing us to track down the time-varying effects of macroeconomic dynamics on both the model-consistent risk premium and the other key variables. Second, we obtain impulse response functions and analyze the implications of a tight monetary policy on major macroeconomic variables. Taking the Turkish economy as our reference point, we find that the arguments of Blanchard (2004) and Favero and Giavazzi (2004) seem to be valid. © 2009 Elsevier Ltd. All rights reserved.
Open Access
Employing the extended Kalman filter in measuring the output gap
(Elsevier BV, 2005) Ozbek, L.; Ozlale, U.
The paper has two parts. In the first part, the output gap and potential output series for the Turkish economy are derived within the context of a non-linear state space model, where the extended Kalman filter emerges as the estimation methodology. Such a methodology allows for time-varying parameters to decompose output into trend and cyclical components. The results imply that both the parameters in the model and the derived series are fairly reasonable and consistent with the path that the Turkish economy followed in the last fifteen years. In the second part, the relation between inflation and the output gap is analyzed. It is found that inflation and the output gap are not positively associated, contradicting studies that view demand side forces as the primary determinants of inflation in Turkey. © 2004 Elsevier B.V. All rights reserved.