# Identification Problem and Dynare Error Message DSGE model

**URL:** <https://forum.dynare.org/t/identification-problem-and-dynare-error-message-dsge-model/3558>\
**Category:** Dynare help (legacy posts)\
**Created:** [10 December 2013 23:13 UTC](https://forum.dynare.org/t/identification-problem-and-dynare-error-message-dsge-model/3558 "2013-12-10T23:13:55Z")\
**Posts on this page:** 3\
**Page:** 1

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**Author:** ![LSHui](https://forum.dynare.org/letter_avatar_proxy/v4/letter/l/6a8cbe/32.png) [@LSHui](https://forum.dynare.org/u/LSHui)\
**Post date:** [10 December 2013 23:13 UTC](https://forum.dynare.org/t/identification-problem-and-dynare-error-message-dsge-model/3558/1 "2013-12-10T23:13:55Z")

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Hi, all  
I am trying to use a DSGE model based on Adolfson 2005 to do forecast.  
When I run identification command, there are 25 parameters can not be identified by model, after go through Dynare forums and found solution from this topic: [Mode check-shock variance log likelihood kernel is flat](https://forum.dynare.org/t/mode-check-shock-variance-log-likelihood-kernel-is-flat/3385/6), 19 of them can be identified after following jpfeifer’s advice. But I cannot figure out the identification problem in the rest 6 of them, which are :

xi\_w ----- Probability with which a worker cannot reoptimize his wage  
kappa\_w ------Indexation parameter for wages  
lambda\_m\_c\_ss ---- Steady state time-varying markup in the imported consumption goods sector  
lambda\_m\_i\_ss ---- Steady state time-varying markup in the imported investment goods sector  
tau\_w\_ss ------- Steady-state payroll tax  
tau\_y\_ss ------- Steady-state labour income tax

could you please give me some advice about them? What will cause if we ignore identification problem and do estimation anyway?  
Much appreciated!!

Helen  
[2012Q4.xls](https://forum.dynare.org/uploads/default/original/2X/7/72b108ae45624ebfae22fdaf5847baa276326e5d.xls) (172 KB)  
[data\_2013Q2\_insample.m](https://forum.dynare.org/uploads/default/original/2X/0/080358d5612e97933dc437526f764c2a9a749d86.m) (647 Bytes)  
[DSGE\_Adolfson.mod](https://forum.dynare.org/uploads/default/original/2X/a/a21ea3aa6b036ac631bc23db063b1d7c8094c533.mod) (108 KB)

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**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\
**Post date:** [12 December 2013 19:59 UTC](https://forum.dynare.org/t/identification-problem-and-dynare-error-message-dsge-model/3558/2 "2013-12-12T19:59:24Z")

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The problem is that those parameters enter composite parameters that are once set to a calibrated value and never updated. For example, you try to estimate xi\_w. xi\_w enters in e.g.

```auto

```

But you are only providing the value for b\_w to Dynare while not telling Dynare that b\_w depends on xi\_w. See the document and Remark 4 in [sites.google.com/site/pfeiferecon/Pfeifer\_2013\_Observation\_Equations.pdf?attredirects=0](https://sites.google.com/site/pfeiferecon/Pfeifer_2013_Observation_Equations.pdf?attredirects=0) for a clarifying example.

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**Author:** ![LSHui](https://forum.dynare.org/letter_avatar_proxy/v4/letter/l/6a8cbe/32.png) [@LSHui](https://forum.dynare.org/u/LSHui)\
**Post date:** [13 December 2013 10:23 UTC](https://forum.dynare.org/t/identification-problem-and-dynare-error-message-dsge-model/3558/3 "2013-12-13T10:23:41Z")

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Thank you very much, jpfeifer.

Your reply is so quick,very clear and helpful, especially the linked document. I will follow your advice to figure out the problem.  
By the way, could you please sharing more documents about dynare just like the one you linked in previous post, because it likes a textbook about dynare and DSGE model, practically and systematically.

Thank you for your time!

Helen