Dear all,
I am a beginner with Dynare, DSGE models and DSGE estimation. So, I hope that my questions are not that inappropriate.
I am learning how to use Dynare to do Bayesian estimation with a linearized small open economy NK model. So far, the simulation has worked pretty well, but unfortunately, the estimation has been giving me a headache.
In particular, I have ecountered two problems:

Dynare reports the “Historical and smoothed variables” for all observable variables, and one of the variables is very poorly matched. I’ve read this can be the case because of stochastic singularity, but I have as many osbervables as shocks. Any ideas how can I fix this?

I wanted to try the estimation using endogenous priors as in Christiano, Trabandt and Walentin. So far, I believe that I understand the statistics behind this approach well. However, here I’ve encountered some problems:
When I use lik_init=2, I get the following message: “Error using dsge_likelihood (line 812) Endogenous prior not supported with nonstationary models”
Therefore I’ve changed it to lik_init=1 (which, btw, does not work for me when I try to estimate whitout endogenous priors, any idea why?). Anyway, after changing to lik_init=1, Dynare works until it crashed because of: “Error using chol Matrix must be positive definite.” I’ve read that a quick war to fix this is by changing mode_compute. I’ve tried this several times but it does not work. ANy idea how to fix this?
I woul dreally appreciate your help! Thank you very much in advanced!
Best,
Paul
estimation.zip (20.6 KB)