I have been using the identification command in the unstable 4.3 version of Dynare (most recently 2011-10-04, but the output for identification seems stable across the various unstable updates I have tried). I am confused that my model is reported as being identified:
==== Identification analysis ====
Testing prior mean
Evaluting simulated moment uncertainty … please wait
Doing 483 replicas of length 300 periods.
Simulated moment uncertainty … done!
All parameters are identified in the model (rank of H).
All parameters are identified by J moments (rank of J)
but that the subsequent report about the colinearity patterns seems to clearly show that this cannot be the case. Here is the output for 1 parameter (which I understand to be the correlations between the columns of J):
Press ENTER to display advanced diagnostics
Collinearity patterns with 1 parameter(s)
Parameter Expl. params ] cosn
e eah ] 0.994
ealp rxss ] 1.000
eeta cp ] 0.999
eah rho_ah ] 1.000
ep phistar ] 0.992
efups rho_ah ] 0.991
efinflf a122 ] 1.000
efi a133 ] 1.000
einv rho_inv ] 1.000
eg ealp ] 0.989
e_l philab ] 0.992
d alpss ] 0.997
del cp ] 1.000
phistar eah ] 0.999
rho_phi d ] 0.982
alpss gam ] 1.000
rho_alp einv ] 0.844
etass g0 ] 0.914
rho_eta cp ] 0.999
rho_ah eah ] 1.000
thep a111 ] 0.898
cp del ] 1.000
rho_inv einv ] 1.000
cpf a133 ] 0.999
rxss gam ] 1.000
usta rho_ah ] 0.076
pif rxss ] 0.078
rho_g rxss ] 1.000
g0 etass ] 0.914
philab e_l ] 0.992
a111 cp ] 0.995
a122 efinflf ] 1.000
a133 efi ] 1.000
gam rxss ] 1.000
I see many pairs of parameters with (near?) perfect colinearity. This surely implies that the matrix J is not of full column rank? When I look at the smallest eigenvalues they are also suspect. The smallest one is 2.65e-7, which looks alot like zero to me. [The largest eigenvalue is 2756.]
Can I trust the output from identification? Or perhaps I do not understand something, and there is no inconsistency. I suppose the collinearities of 1.000 above are not perfect collinearties, but rounded values, but still…
I also have another related question: in Dynare 4.1.3 there were box and whisker plots for these collinearities. But in 4.3 unstable I don’t know what the value is that is being reported. Is it the mean of the box and whisker plot, or the maximum value, or some other value? Or is it not based on the Monte Carlo sample, but based on the prior means of the parameters?
Any help would be greatly appreciated.
Thank you.
Sincerely,
Rob Luginbuhl