Kalman’s Expanding Influence in the Econometrics Discipline

Abstract

Kalman's original work was quickly adopted and explored throughout the engineering disciplines after the publishing of his seminal paper in 1960 (Kalman 1960). However, it would be several decades before the utility of his framework was understood and adopted in the econometrics discipline, which had traditionally based its analysis on the Box-Jenkins ARIMA time series models. This paper surveys how Kalman's work has been applied in developing econometric models and how econometricians have extended and built upon Kalman's framework to develop new techniques to model complex economic and financial systems over the past 20-25 years.