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Hi,

I encountered a problem with estimation. I am trying to estimate SOE model of Gali (2015) Chapter 8. This is my first estimation attempt so it could be a trivial issue but I will be very glad for any suggestion. I downloaded the code from Prof. Pfeifer's GitHub page and tried to modify a bit. The code works perfectly for simulation. However, when I tried to include the estimation part I get the following message:


ESTIMATION_CHECKS: There was an error in computing the likelihood for initial parameter values.
ESTIMATION_CHECKS: If this is not a problem with the set 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 print_info (line 42)
Blanchard-Kahn conditions are not satisfied: no stable equilibrium

so I tried the mode:6

estimated_params_init(use_calibration);
end;

then the estimation process begins but acceptance ratio remains at 0.

Could somebody help me?

Thanks,

You need to set the

Code: Select all

diffuse_filter

option of estimation, because the model has a unit root.
Also, do not use the two-sided HP-filter. See Remark 12 (Non-Causal Filters) in Pfeifer(2013): "A Guide to Specifying Observation Equations for the Estimation of DSGE Models" https://sites.google.com/site/pfeiferec ... ations.pdf.

problem solved, many many thanks for the help.