Hi,
I’m working on the third-order estimation of a model using the particle filter.
The model solves (IRFs for the third order are produced) and the estimation works at the first order. However, when switching to third order, the estimation produces the following error:
dynare:k_order_perturbation: Caught Kord exception: The model is not Blanchard-Kahn stable
k_order_pert was unable to compute the solution
I tried to adjust the calibration and include an empty estimated_params_init-block with use_calibration option, but this does not work either.
I’m attaching the .mod file and the data file, any help on how to solve this issue is appreciated.
Thanks a lot!
Data.mat (1.8 KB)
TR_v3_filter.mod (4.0 KB)
You are estimating a model with a unit root with a nonlinear filter. The diffuse_filter option is inapplicable for a nonlinear filter. You need to set nonlinear_filter_initialization=3.
From the manual:
nonlinear_filter_initialization = INTEGER
Sets the initial condition of the nonlinear filters. By default the nonlinear filters are initialized with the unconditional covariance matrix of the state variables, computed with the reduced form solution of the first order approximation of the model. If nonlinear_filter_initialization=2,
the nonlinear filter is instead initialized with a covariance matrix estimated with a stochastic simulation of the reduced form solution of the second order approximation of the model. Both these initializations assume that the model is stationary, and cannot be used if the model has unit roots (which can be seen with the check command prior to estimation). If the model has stochastic trends, user must use nonlinear_filter_initialization=3, the filters are then initialized with an identity matrix for the covariance matrix of the state variables. Default value is nonlinear_filter_initialization=1 (initialization based on the first order approximation of the
model).
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