KALMAN FILTERING AS A TOOL TO STUDY THE TECHNOLOGICAL SUBSTITUTION IN THE TELECOMMUNICATIONS SECTOR

Abstract This paper tries to ascertain the validity of Kalman Filtering in forecasting technological substitution. It is also concerned with this process in the Spanish Telecommunications Sector. With that aim, the ability of this methodology and that of Ordinary Least Square in describing and forecasting the different substitution processes that have taken place in this sector are compared. Some conclusions are drawn from the different speeds of substitution observed between both processes, and it is also stated that Kalman Filtering is superior to Ordinary Least Square, both in estimating and in forecasting in the short term.