Kalman Filter in the Problem of the Exchange and the Inflation Rates Adequacy To Determining Factors

Paper: arXiv 2503.10117

Authors: N. S. Gonchar, W. H. Kozyrski, A. S. Zhokhin, O. P. Dovzhyk

Abstract

Using introduced concept of the exchange and inflation rates adequacy, the relevance of them to the determining factors is found. We established close positive relation between hryvnia / dollar exchange and inflation rates, fiscal deficit, price level of energy sources, and money supply. On this basis, we give proposals for state macroeconomic policy to stabilize Ukrainian economy.

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 4.0/10
• Quadrant: Lab Rats — theoretically deep, empirically untested

Why this score: The paper presents a reasonable mathematical formulation combining state-space models, Kalman filtering, and linear regression to model unobservable adequate exchange and inflation rates in Ukraine. However, the empirical testing is very limited, providing only a small table comparing forecast values with historical data without comprehensive out-of-sample backtesting or robust statistical validation.

Research Flowchart

  flowchart TD
    A[Research Goal: Assess Exchange & Inflation Rate Adequacy in Ukraine] --> B[Data Inputs: Fiscal Deficit, Energy Prices, Money Supply M3]
    B --> C[Methodology: Introduce Rate Adequacy Concept]
    C --> D[Computational Process: Apply Kalman Filter Analysis]
    D --> E[Key Findings: Strong Positive Relation with Macro Factors]
    E --> F[Outcomes: Macroeconomic Policy Proposals for Stabilization]