Error: the forecast error variance in the multivariate Kalman filter became singular

Estimation
1

Hello,
We’ve got a problem with this code. In particular, we have to estimate a model with flexible prices and wages. But Dynare put up this error:

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):

Thank you for your help, best regards.gruppo4.zip (36.1 KB)

2

Your model implies a perfect linear combination between the observables. If you drop output from the varobs the file will work.

3

But in the next step we have to estimate dy, so we cannot drop it from the file!

4

Please read up on “stochastic singularity”. See e.g. Cannot have more observed variables than shocks?