# Estimating the correlation between shocks

Dear all,
I got some troubles using Dynare 4 by estimating the correlation between shocks. So in the “shocks” section I just assumed that the correlation coefficient between shocks is equal to 1:

shocks;
var e_a; stderr 0.5;
var e_a, e_x = 0.50.5;
var e_ph; stderr 0.5;
var e_ph, e_x = 0.5
0.5;
var e_t; stderr 0.5;
var e_t, e_x = 0.50.5;
var e_th; stderr 0.5;
var e_th, e_x = 0.5
0.5;
var e_x; stderr 0.5;
end;

In the “estimated_params” section I specified correlation coefficients to be estimated using MLE as follows:
estimated_params;
stderr e_a,0.5,;
corr e_a, e_x,0.123,-1,1;
stderr e_ph,0.5,;
corr e_ph, e_x,0.152,-1,1;
stderr e_t,0.5,;
corr e_t, e_x,-0.845,-1,1;
stderr e_th,0.5,;
corr e_th, e_x,-0.427,-1,1;
stderr e_x,0.5,;
end;

After running the .mod-file I got estimation results for standard deviation and correlation coefficients of specified shocks
AND the following error message:

??? Undefined command/function ‘Sigma_e_’.

Error in ==> set_all_parameters at 42
Sigma_e(k1,k2) = xparam1(i+offset)*sqrt(Sigma_e_(k1,k1)*Sigma_e_(k2,k2));

Error in ==> DsgeSmoother at 35
set_all_parameters(xparam1);

Error in ==> dynare_estimation at 887
[atT,innov,measurement_error,filtered_state_vector,ys,trend_coeff] = DsgeSmoother(xparam1,gend,data);

Error in ==> test12_2 at 284
dynare_estimation(var_list_);

Error in ==> dynare at 79
evalin(‘base’,fname) ;

Until now I have not found out, why this error message shows up.