Issues replicating Chilean Ministry of Finance Semi-Structural Multivariate Filter (FMV) for Output Gap – Hessian not positive definite

Stochastic simulations Semistructural Modeling
1

Hello everyone,

I am trying to replicate the Semi-Structural Multivariate Filter (FMV) used by the Chilean Ministry of Finance to estimate the non-mining output gap, as described in official budget and technical documents. However, I am encountering persistent issues during estimation.

Software versions

  • MATLAB: R2025a

  • Dynare: 6.5
    I have also tested Dynare 6.1 and 6.4, but the problem remains unchanged across versions.

I am attaching:

  • The .mod file

  • The data file

  • A screenshot of the error message

Any guidance or suggestions would be greatly appreciated.

image
image805×513 17.5 KB

FMV_Hacienda_2025.mod (2.5 KB)

FMV.xlsx (14.4 KB)

run.m (437 Bytes)

2

It looks to me as if either your data treatment of the observation equations are wrong. If you inspect the smoothed shocks, you will see that the interest rate and inflation shocks have ranges between -3 and 3. That is because these objects are measured as 1 representing 1 percent. However, the shocks specified have standard deviations that have 0.01 representing 1 percent. Put differently, you have inconsistent multiplications with 100 in your model.