Fresh perspectives on unobservable variables: Data decomposition of the Kalman smoother

Release date
02/12/2013
Reference
AN2013/09
Author
Nicholas Sander
ISSN
2230‐5505
Macroeconomics makes extensive use of concepts for which there are no observed data. Empirical estimates of such unobservable variables - core inflation is one example - have to be estimated from observed data. The data decomposition tool helps identify the contribution of each piece of observed data to the estimate of the unobservable variable.