Dynare forums

Your mode_check-plots tend to look strange, suggesting you did not find the correct mode. There is no reason to use the diffuse filter in your case. There is no unit root. I ran the regular filter with mode_compute=9 and it returned

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Fval obtained by the minimization routine (minus the posterior/likelihood)): -339.518149

RESULTS FROM POSTERIOR ESTIMATION
parameters
           prior mean     mode    s.d. prior pstdev

psi_db         0.165   0.0447     NaN gamm  0.1250
psi_dh         0.120   0.0000     NaN gamm  0.1250
psi_k          1.166   1.1289     NaN gamm  0.5000
psi_m          0.173   0.8743     NaN gamm  0.1250
psi_a          0.396   0.2824     NaN gamm  0.1250
psi_h          0.892   0.3710     NaN gamm  0.5000
rho_b          0.219   0.1578     NaN beta  0.1000
rho_m          0.250   0.5014     NaN beta  0.1000
rho_TB         0.925   0.9890     NaN beta  0.1000

standard deviation of shocks
           prior mean     mode    s.d. prior pstdev

epsilon_TB_I   0.004   0.0017     NaN invg  0.0250


As you can see

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psi_dh

ran to 0, which may be due to the prior with an asymptote at 0.

Thank you so much for running my codes.
Yes your right, I see the 0 mode for psi_dh that is problematic. That is quiet strange, Would you think there is a way to fix this issue?

First of all, estimating such a model on only one observable series is a bit of a stretch. Maybe adding other observables will help. Regardless, you should aim at a prior with an interior peak instead of one with an asymptote. Play around with the variance of the prior.

Dear Professor Jpfeifer,
Many Thanks for your great hint. To add some other observable series,(considering I have only one shock in my model), I used your very informative Guide line "A Guide to Specifying Observation Equations for the
Estimation of DSGE Models", and I used measurement errors to add 3 other observable series to my estimation. Then I tried to reduce the number of estimated parameters and add one by one (and run estimation after adding each parameter) to find which one causes the problem. I found the problem comes from "rho_b" (inertia for capital constraint) and "rho_m"(inertia for collateral constraint). Then as your comment, I changed their variances to see in which range, estimation works and Dynare can find the steady state and now the model works. I have 2 question:
1. In order to find the prior's mean and st error, At first, I used mode_compute=6 and I put the estimated mean and st error as the prior's mean and st error for my new estimation with mode_compute=4, Is this way ok or this causes problem for estimation?
2. after estimating model with mode_compute=4, I have 2 parameters that their posterior are very close to their priors, does it show something wrong? (Considering a line in the guideline which says if posterior is close to prior that shows a mistake)
I attache my .mod file here.
Sincerely,
Leo

1. Your prior is your prior before seeing the data. What you describe is problematic, because it will result in wrong inference. You should simply choose a prior that looks sensible, i.e. has a single peak around e.g. 1 percent standard deviation and is somewhat diffuse.
2. That simply means your data is not very informative. If the identification command does not complain, this should be fine.

Dear Professor Jpfeifer,
I am very grateful to you for your help. You are absolutely right. I changed the mean and st errors as your comment and I ran the estimation. Now ,I think, everything looks good.
Sincerely,
Leo