Foortran Toolkit

Fortran toolkit

Borja Petit

tauchen

subroutine tauchen(xvec,rho,mu,sigma,n,pmat)
  implicit none
  integer     , intent(in)  :: n
  real(kind=8), intent(in)  :: rho,mu,sigma,xvec(n)
  real(kind=8), intent(out) :: pmat(n,n)

This function returns the transition matrix for a discretized AR(1) process of the form:

\[x' = \texttt{mu} + \texttt{rho} \cdot x + \texttt{sigma} \cdot u , \ \ \ \ \ \text{with} u \sim N(0,1)\]

The vector with the values of $x$, xvec, is of dimension n and does not need to be equally spaced.

Dependencies: normaldist

(back to index)

Example

Imagine a variable $x$ that follows an AR(1) procress with an autocorrelation of 0.8 and subject to normal shocks with stadard deviation 0.2.

! create a 100-point equallly soaced grid for the variable "x"
xvec = grid( 3*0.20 , -3*0.20 , 100 )

! get the transition matrix for the discretized AR(1) process
call tauchen(xvec,0.80,0.00,0.20,100,pmat)