Forecast error variance in multivariate Kalman Filter became singular

Hi there,

I am getting the following error when I try and estimate the attached model:

initial_estimation_checks:: The forecast error variance in the multivariate Kalman filter became
singular.

wsnff.mod (6.3 KB)
dsge_est1.xlsx (39.5 KB)
wagesub_stst1.mod (942 Bytes)

This seems strange because stochastic simulation runs fine on the calibrated model, and I can estimate the model if I drop one of the GDP related variables (i.e. Government investment or consumption for example). Also, estimation still doesn’t work when I initialize the Kalman Filter with the calibrated parameters. I don’t think there is a problem with the model- the model diagnostics all suggest the model is fine.

Just wondering if anyone had any tips on solving this problem? It would be nice to estimate the model with all of the components of closed economy GDP included if possible.

Apologies, with correct files this time!
wsnff.mod (6.2 KB)
wagesub_stst1.mod (942 Bytes)
dsge_est1.xlsx (20.9 KB)

That is not feasible. See

Hi Professor- thanks for your response- There are an equal number of shocks and observable series in the model. That is not the problem. Adding more shocks does not solve the problem.
:smiley:

Don’t focus on the number of shocks. The problem also arises when there is an exact linear combination of observables implied by the model. You wanted

That is an exact linear combination due to
Y=C+I+G
and explains why it works when you drop one of those.

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