Noobie here with Dynare. I’m trying to estimate a very simple DSGE model using simulated data from the same model (just to make sure that the model works properly). Therefore, I expect the posterior of the parameters to converge to their true (calibrated) values.

The estimation and identification works for all but one parameter (“bet”, the discount factor). When I include this one, the estimation crashes for all the optimizers. I have tried with different prior distributions for this parameter as well but without results.

Why are you using such a strange prior for beta? It allows for beta>1 which is not allowed by the model due to stability problems. Also, starting at 0.8 if the true value is 0.992 is crazy. The simulated data will strongly reject a 20 percent steady state interest rate, but your prior thinks that an interest rate bigger than 10 percent is the most likely value.

Thank you for you answer. I see that now. However, I have tried with several specifications for that prior, for instance bet,0.99,0.5,0.99999,normal_pdf,0.99,0.01;

When estimated alone, and even with some combination of parameters, there is no problem in the estimation. But when I try to estimate all of them, it crashes. Even when I estimate only alpha (capital share) and beta it crashes as well.

I couldn’t solve this with different priors, solvers, and definitions of the model. Simulated data provides all the observables, and still beta can’t be identified. Any suggestions?