Data Assimilation for Parameter Estimation in Economic Modelling

Abstract

We propose a data assimilation approach for latent parameter estimation in economic models. We describe a dynamic model of an economic system with latent state variables describing the relationship of economic entities over time as well as a stochastic volatility component. We show and discuss the model's relationship with data assimilation and how it is derived. We apply it to conduct a multivariate analysis of the cryptocurrency ecosystem. Combining these approaches opens a new dimension of analysis to economic modelling. Economics, Multivariate Analysis, Dynamical System, Bitcoin, Data Assimilation