This comes from a problem with the initialization of the diffuse Kalman filter with cointegrated systems. We made some progress in version 4 and, in the case of this model, I can’t replicate the problem in v4, so I guess the procedure currently in version 4 is correct for this model.
We are currently working on a more general solution.
By the way, I don’t understand why you feel necessary to introduce x rahter than writing simply
You are absolutely right, I could have just written the equation like that…
Regarding the error message, I had seen that it does not appear with version 4. I posted the question because by comparing the estimates v3 and v4 give, the are roughly the same, and therefore it seems that I can still trust the estimates of v3 even if the error message appears… do you think I am right?
By the way, I ask the question because I know that some of my programs won’t run in version 4… see for instance the attached sample code. The problem I have is that I have to solve for the state space representation myself in the ‘model’ section. The reason is that I am handling a non-standard model where the information set of the agents is restricted (they do not observe some of the shocks, but receive a signal about them, and then they do Kalman filtering, as in Lorenzoni 2006). Therefore, Dynare’s procedure would not give me the state-space representation we want.
I have thought hard about how to “trick” Dynare to compute the state-space representation we want, but so far it seems impossible. So, I have to solve for it myself and give complicated parameter transformations in the ‘model’ section. The code I attached is an example where I handle a matrix using the ‘#’ option, using iterations, and then try to estimate the deep parameters. It works fine, but only with version 3 (I think I read somewhere that you are still working on parameter transformations in v4).
Michel, if you have a couple of minutes, could you please point to potential issues I could run with this type of codes? Your help will be highly appreciated. expe2.mod (515 Bytes)