Hi. I would like to estimate a model in which some parameters change over 2 sub-samples. Here’s an example. y = 0.9*E(y(+1)) + alphaa2*r + eps_y; r = gamma*y + eps_r; I would like to estimate alphaa2 that should be the same in the whole sample and the gamma that has one value for the first half …

The point from Michel is that nonlinear setups like the one you envisioned will not survive linearization. It’s far from clear whether a linear alternative exist. The big problem is: the density of alphaa2 will depend on gamma and vice versa. By fixing alphaa2 to a value that conditions on no break…

Dynare Forum

Estimation in sub-samples

Estimation

jpfeifer July 5, 2022, 9:20am 2

The dummy approach will not work. See Structural break in Bayesian estimation and DYNARE syntaxis
The correct way would be as in

All other approaches will not deliver the full joint density.

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