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Applying Kalman Filter on Solving Simultaneous Equations with Overidentifying Rank Restrictions: The Analysis of the Demand and Supply Model of Medium-size Scooter Market in Taiwan

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Abstract

Once the structure form of demand and supply is translated into areduced form, one can solve the reduced form with a state space modelof the Kalman filter method. This paper discusses an innovationrepresentation that links the structure form with the state space model.For the state space model, the recursive Expectation Maximization(EM) algorithm is used to estimate the parameters of a structure form.This research successfully applied the Kalman filter method to theestimation of the coefficients of simultaneous equations withoveridentifying rank restrictions. The empirical monthly data set camefrom the medium-size scooter market in Taiwan during 1987 to 1992period.

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Authors and Affiliations

  1. Institute of Management Science, National Chiao Tung University, Taipei, Taiwan

    Chyan Yang & Wen Den Chen

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  1. Chyan Yang
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  2. Wen Den Chen
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Yang, C., Chen, W.D. Applying Kalman Filter on Solving Simultaneous Equations with Overidentifying Rank Restrictions: The Analysis of the Demand and Supply Model of Medium-size Scooter Market in Taiwan. Economics of Planning 30, 33–49 (1997). https://doi.org/10.1023/A:1002977020341

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