Specify which state variables have or should be treated as if they have a unit root. If your model has unit roots (or you want to pretend that it does), then YADA needs to know how to treat these when selecting an initial covariance matrix for the state variables before running the Kalman filter.
A state variable which has been selected as a "unit-root variable" is skipped when calculating the covariance matrix of the state variables when the user has selected an initialization method that implies finite variances. Instead, its variance is initialized as a large constant. See the Kalman filter selections frame on the Settings tab.
Another case where the selection of "unit-root variables" matter is when you have chosen to use diffuse initialization of the Kalman filter. In that case, unit-root variables are given a finite (unit) initial variance, while other state variables are given an infinite initial variance.
Additional Information
• | A more detailed description about the Kalman filter can also be found in Section 5 of the YADA Manual. |
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