Nelson siegel model estimed by Kalman Filter

Hi, I'm having some trouble in estimating the Nelson Siegel model with the Kalman Filter according to the metodology presented in the paper "The macroeconomy and the yield curve: a dynamic latent factor approach". Can I share some ideas with someone who is familiar with this approach.

Answer 1

[Horace]

Hi, I hope you're well.I'm working with the Nelson Siegel model as well.I'm wondering whether you have solved it and how you solved it.Thank you!

[Alberto]

I was able to get convergence only with the exclusion of macroeconomic variables from the state equation. So in order to asses the link between state variable and macro I needed to estimante another model.

Answer 2

[Jonas Striaukas]

I have a code, but for me it does not converge when I have Q_t (3x3 measurement error matrix) positive definite and it does if I have diagonal matrix. Maybe someone had the same issue? i think is to do with initializing Kalman filter but not sure..

[Alberto]

my personal experience is that starting values are a very tricky issue with the kalman filter. If you are trying to replicate a paper you may use the final estimed parameters of the paper as starting values for your problem.

Answer 3

[asma noor]

i am also working with nelson siegle model estimated by kalman filter but its complex one anyone there who help me out how i can estimate that command.