Hi Secular, Thank you so much for code sample. You are correct the right hand side is rho*GDP_t-1 and rho < 1. Your code sample run without error, but did not produce any result except input data set information, model summary, and ID variable information. I am trying to replicate a working paper by Aruba et. al. (2013). The paper is entitled Improving GDP Measurement: A Measurement-Error Perspective. They used a slightly different state space representation than your formulation as follows: State equation: GDP_t = mu(1-rho) + rho*GDP_(t-1) + eta_Gt alpha_t = K + T alpha_(t-1) + eta_t where is K 3 by 1 matrix (displayed row-wise) K =(mu(1-rho) 0 0) T is 3 by 3 matrix (displayed row-wise) T=(rho 0 0, 0 0 0, 0 0 0) alpha_t is 3 by 1 matrix (displayed row-wise) alpha_t = (GDP_t eta_It eta_Et) Observation equation: GDP_It = GDP_t + eta_It GDP_Et = GDP_t + eta_Et Y_t = Z alpha_t where Y_t is 2 by 1 matrix (displayed row-wise) Y_t = (GDP_It GDP_Et) Z is 2 by 3 matrix (displayed row-wise) Z = (1 1 0, 1 0 1) alpha_t is 3 by 1 matrix (displayed row-wise) alpha_t = (GDP_t eta_It eta_Et) (eta_Gt, eta_It, eta_Et) ~iidN(0,∑) where ∑ is 3 by 3 matrix (displayed row-wise) ∑ = (sigma_sq_GG 0 0, 0 sigma_sq_II sigma_sq_IE, 0 sigma_sq_EI sigma_sq_EE) My difficulty is with the constant K matrix in the state equation as I've not seen any example in the Proc SSM manual with the K matrix.
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