Dear Professor Pfeifer,
I have ecountered a problem when doing the Bayestion estimation. Would you please give some advice? Thank you very much.
The parameter gamma is the one that I want to estimate in the model. I set its prior mean as 2 for example, and then run the code. The Dynare displays that ‘‘Initial value of the log posterior (or likelihood): -729.6099’’.
When I change its prior mean to 0.5, Dynare displays that ‘‘Initial value of the log posterior (or likelihood): -1734452.5732’’, which is a very large number.
(1) Does this mean that setting prior mean at 2 is better than 0.5?
(2) When I write the estimated_params block, I write like
But I do not quite understand what is the meaning of first ‘‘0.5’’? and in what situation should I change it ?
Any reply will be appreciated. Thank you !