Hi everyone, I produce the DSGE model specification with housing collateral and bank lending. I am running the model in Dynare by using calibration. It works well but NOT in Bayesian estimation. I’ve got stuck in computing likelihood for initial parameter values, though I give the same set of initial values that I use in the calibration part. If someone is professional and can help me checking or getting through this problem. It would be very very appreciated.

Here is the problem,

initial_estimation_checks:: The forecast error variance in the multivariate Kalman filter became singular.

initial_estimation_checks:: This is often a sign of stochastic singularity, but can also sometimes happen by chance

initial_estimation_checks:: for a particular combination of parameters and data realizations.

initial_estimation_checks:: If you think the latter is the case, you should try with different initial values for the estimated parameters.ESTIMATION_CHECKS: There was an error in computing the likelihood for initial parameter values.

ESTIMATION_CHECKS: If this is not a problem with the setting of options (check the error message below),

ESTIMATION_CHECKS: you should try using the calibrated version of the model as starting values. To do

ESTIMATION_CHECKS: this, add an empty estimated_params_init-block with use_calibration option immediately before the estimation

ESTIMATION_CHECKS: command (and after the estimated_params-block so that it does not get overwritten):Error using initial_estimation_checks (line 143)

initial_estimation_checks:: The forecast error variance in the multivariate

Kalman filter became singular.

Here are the mod files

obs44.xlsx (12.8 KB)

version1_est.mod (15.3 KB)

Best,

Krissy