Hi,

I’m using Dynare 4.5.3 for estimation.

I have a *steadystate.m file that assigns parameter values to M*.params.

Dynare complains about this and eventually throws an error

initial_estimation_checks:: The forecast error variance in the multivariate Kalman filter became singular.

initial_estimation_checks:: This is often a sign of stochastic singularity, but can also sometimes happen by chance

initial_estimation_checks:: for a particular combination of parameters and data realizations.

initial_estimation_checks:: If you think the latter is the case, you should try with different initial values for the estimated parameters.

ESTIMATION_CHECKS: There was an error in computing the likelihood for initial parameter values.

ESTIMATION_CHECKS: If this is not a problem with the setting of options (check the error message below),

ESTIMATION_CHECKS: you should try using the calibrated version of the model as starting values. To do

ESTIMATION_CHECKS: this, add an empty estimated_params_init-block with use_calibration option immediately before the estimation

ESTIMATION_CHECKS: command (and after the estimated_params-block so that it does not get overwritten):

Error using initial_estimation_checks (line 143)

initial_estimation_checks:: The forecast error variance in the multivariate Kalman filter became singular.

If I follow the advice and “try using the calibrated version of the model as starting values”, the likelyhood is flat, as if the parameter values are not updated.

I don’t remember having faced this problem in the past.

Q: Has Dynare recently changed the way it handles the steady state file in estimation?

Q: Is there a way to avoid re-computing the steady state during estimation? (the estimated parameters don’t affect the steady state)

Thanks and best regards,

Gianni