I have a questions related to Dynare and estimation of liniearized DSGE model. As far as I understand about the estimation of liniearized DSGE model that
Step 1, the posterior mode and Hessian matrix evaluated at the mode is computed by standard numerical optimization routines.
Step 2, The Hessian matrix is used in the MH algorithm to generate a sample from the posterior distribution
So I found that the step 2 will be excuted mainly based on the result of the step 1.
Now turning to Dynare
To do this step in Dynare, I declare a command as following
For step 1
I set the method of optimization with 7 (mode_compute = 7),
then set up the maximum number of interation equals to 100,000 a long with the maximum number of function evaluation of 100,000
In dynare as: optim = (‘MaxIter’,100000,‘MaxFunEvals’,100000)
After the initial computation, then I use the previous estimated result as the starting point for next computation by declaring the command in Dynare:
Then I do it again and again until when I can know that I should stop this procedure to move to step 2? or based on which criterial point I can stop doing step 1 in Dynare then to let Dynare doing step 2 (MH algorithm)?
(I see during this procedure of step 1, the likelihood reduces so much, but some rounds it does not)
Second question is what happen if dynare report that the Hessian matrix is positive? What should I do for this? (My understanding is that to compute MH algorithm, then the Hessian matrix will be use and the Hessian matrix should be negative, is this correct understanding?)
Thank you a lot