Weird diagnostic plots

Estimation ML/Bayesian estimation
1

Hello,

My diagnostic plots and priors and posterior plots doesn’t look well behaved (attached below). Any clue as to why this is the case. Im using NK_baseline.mod and four observables; (1) real output per capita
growth, (2) real wages per capita, (3) the consumer price index, and (4) Overnight rate. Happy to provide more ifo if required.

NK_baseline_udiag1.eps (231.9 KB)
NK_baseline_udiag2.eps (231.5 KB)
NK_baseline_udiag3.eps (232.0 KB)
NK_baseline_udiag4.eps (232.4 KB)
NK_baseline_udiag5.eps (232.5 KB)
NK_baseline_udiag6.eps (232.9 KB)
NK_baseline_udiag7.eps (231.4 KB)
NK_baseline_udiag8.eps (216.9 KB)
NK_baseline_udiag9.eps (235.8 KB)
NK_baseline_udiag10.eps (195.4 KB)
NK_baseline_PriorsAndPosteriors1.eps (295.0 KB)
NK_baseline_PriorsAndPosteriors2.eps (305.6 KB)
NK_baseline_PriorsAndPosteriors3.eps (241.2 KB)
NK_baseline_PriorsAndPosteriors4.eps (185.3 KB)

2

How did the mode_check-plots look like. It looks like a corner solution.

3

Hello Professor,

I didnt have the mode_check option on in this run. I have a suspicion that my data has a trend (see attached)
dataset.csv (8.1 KB)

4

There doesn’t seem to be an obvious trend, but you need to make sure the means of the data match the steady states of the variables.

5

Does this imply that I should have exact steady state values as the means of the observable data?

6

Not exactly, but in the same range. In-sample, shocks can cause deviation from the average, i.e. the steady state. But if these deviations are too large, you force the shocks to have extreme persistence.

7

Hello Professor,

I’m getting better results after I adjusted data to be in the neighborhood of the Steady state values. Thank you.

I have one question regarding the observable equations in NK baseline model. Can I use GDP per capita growth directly? In other words should the observable equation for yd should be

yd_obs = yd

or

yd_obs =log(yd)-log(yd(-1))+mu_A
8

It should be the second option. The first one is not a growth rate.

9

Thank you professor.

In that case, do I need to add following equation to the external steady state file?

yd_obs = mu_A;
10

Yes, that is correct.

11

data_x.csv (1.3 KB)
NK_baseline.mod (11.9 KB)
NK_baseline_steadystate.m (4.9 KB)
NK_baseline_mdiag.eps (188.8 KB)
NK_baseline_udiag8.eps (214.1 KB)
NK_baseline_udiag7.eps (235.0 KB)
NK_baseline_udiag6.eps (235.1 KB)

Hello Professor,

When I did above changes, convergence diagnostics charts show a peculiar pattern (two horizontal lines) in all charts (few charts attached herewith for your perusal). What could be the cause of this? I’ve provided the mod. file and the steady state file. Your guidance in resolving this would be of immense help.

12

Have a look at the mode_check-plots. For example, the standard deviations are not identified as they do not even show up in the model.

13

The issue seems to prompt as soon as I add the yd_obs = mu_A; to the steady state file. Do I need to do any other modifications to the steady state file?

14

Did you fix the other issues?