Dear all,
there is a serious issue
in both the current snapshot and Dynare 4.2.5 when the
covariance matrix of the structural errors is not diagonal.
I attached a mod-file showing the issue.
The situation is as follows: The model specifies a
correlation between two shocks using
shocks;
var e_g;
stderr 1;
var e_R;
stderr 1;
corr e_R, e_g = 0.5;
end;
The preprocessor then sets M_.Sigma_e to [1 0.5; 0.5 1]. In
a next step, I want to estimate the standard errors of e_R
and e_g
estimated_params;
stderr e_R, inv_gamma_pdf, 0.01, inf;
stderr e_g, inv_gamma_pdf, 0.01, inf;
end;
The problem is that I wanted to specify a predefined
correlation between the two shocks. However, when the
estimation updates the standard
deviation of the shocks only the diagonal is updated, but
not the off-diagonal elements, which stay at 0.5. As a
result M_.Sigma_e becomes
[0.01^2 0.5; 0.5 0.01^2] when the prior mean is used as
initial values for estimation. But given a correlation of
0.5 it should be [0.01^2
0.5*0.01^2; 0.5*0.01^2 0.01^2] The reason is that the
preprocessor sees no need for updating the off-diagonal and
sets estim_params_.corrx0[]. Hence, in
set_all_parameters.m the covariances are not set. This bug
is the reason the attached mod-file crashes with a warning
that the SS-matrix is not
positive definite when you comment out the
"corr..."-statement in estimated_params that leads to the
crash in identification.
The same problem also occurs if I use "var e_R, e_g =
0.5*1*1;" instead of "corr e_R, e_g=0.5". I am not sure what
is the best level to fix this bug as it both involves the
estimation routines as the preprocessor.
Best,
Johannes
--
Johannes
Pfeifer
Haußerstr.
29
72076
Tübingen
Tel.:
+49-(0)7071-6396184
Mobil.:
+49-(0)170-6936820
Germany