Dynare forums

Good day everyone. I received the following error message from Bayesian estimation. Can anyone give me some suggestion? Thank you.


Error in computing likelihood for initial parameter values
Blanchard Kahn conditions are not satisfied: no stable equilibrium

Hi

before estimating a model, you have to be sure that your model has (at least) one stable equilibrium for a given set of parameters. You have that error because Dynare starts the maximization of the likelihood with an initial combination of parameter values (the value you fixed for the parameters you fixed and the mean of the prior distribution for the parameters you are going to estimate) which have to solve the model, i.e. the have to allow for an equilibrium to exist (and be stable). In you case you have picked values which give you an unstable equilibrium.

Paolo

Dear Paolo,

Thank you for your reply. I appreciate.