Hi all,
I’m using a CES production function instead of the Cobb-Douglas specification in my model, and I’d like to estimate the CES parameters using Bayesian estimation in Dynare. At the same time, I would like to impose a prior on the steady-state capital share to help identify the parameters. Is this possible in Dynare, and if so, how should I implement this?
Thanks a lot!
It seems like I can use the system prior in the example (Gali 2015) of the Dynare forder, but I’d like to confirm if that’s correct. Also, if I want to provide multiple restrictions instead of just one like in the example, I’d like to ask how to construct the log_prior_val in that case.
Yes, using a system prior is the correct way to proceed. If your priors are independent, the log_prior_val for multiple restrictions is just the sum of the individual log priors.
Thank you so much!!