Dear Johannes

Many thanks for your enlightening answers. I am using Dynare 4.4.3 together with Matlab R2015a. I have entered the measurement error as follows:

model;

…

gini_obs=gini-ginis+sige1*e1;

end;

and I have estimated the standard error by imputting

shocks;

…

var e1; stderr 1;

end;

estimated_params;

…

sige1, inv_gamma_pdf, 0.01, inf;

…

end;

I think the problem with the scale you mentioned was related to the way I imputted the standard error. If I imput it this way:

model;

…

gini_obs=gini-ginis+e1;

end;

estimated_params;

…

stderr e1, inv_gamma_pdf, 0.01, inf;

…

end;

the scale seems to be consistent. However, the smoothed series is still equal to the observed (see figure 1+2). Last but not least, I specified the measurement error like this:

model;

…

gini_obs=gini-ginis;

end;

estimated_params;

…

stderr gini_obs, inv_gamma_pdf, 0.01, inf;

…

end;

In this case the observable and the smoothed series deviate and the deviation seems to match the measurement error (see figure 3+4) as it should be.

Accordingly, the historical and smoothed variables plot seems to be only correctly produced when using the last approach (Note, the estimated parameters are identical in all three approaches of specifying the measurement error). Is this because with the first two approaches dynare doesn’t know that this shock is a measurement error (i.e. a disturbance in the observation and not in the state equation of the state space representation)?

Best regards,

Raoul

fig4.pdf (10.3 KB)

fig3.pdf (10.3 KB)

fig2.pdf (9.39 KB)

fig1.pdf (12.4 KB)