Covariate Error Bias Effects in Dynamic Regression Model Estimation and Improvement in the Prediction by Covariate Local Clusters

We consider a dynamic linear regression model with errors-in-covariate. Neglecting such errors has some undesiderable effects on the estimates obtained with the Kalman Filter. We propose a modification of the Kalman Filter where the perturbed covariate is replaced with a suitable function of a local cluster of covariates. Some results of a simulation experiment are reported.