Hi everyone, I am estimating a model with correlated shocks using bayesian estimation with the command: corr e_x e_y, somepdf, expected value, sigma; Assuming I have no informative prior, what are the recommended distributions for the correlation parameter? I tried with a normal distribution and …

Most often, you would use a generalized beta distribution or just live with a truncated normal distribution.

[image] jpfeifer: generalized beta distribution Generalized beta distribution? Do I need to specify more than one prior parameter after “beta_pdf”? Is this also applicable for negative correlation?

Yes, the third and fourth optional parameter are for the lower and upper bound. When not specified, they are [0,1], but you could stretch the distribution to the interval [-1,1].

Great. Thanks! By the way, is there a documentation for the available pdfs and the parameters’ description? I could only find a list of them in the manual in section 4.15, but without the parameters’ description.

See [image] Inverse gamma prior type ML/Bayesian estimation Note that a more recent version of this document is available on my website ( https://stephane-adjemian.fr ) or directly from here . Best, Stéphane.

Dynare Forum

Recomendded prior for the correlation of two exogenous variables

Estimation ML/Bayesian estimation

jpfeifer 3 August 2022 11:31 6

See