File: dsge_var_likelihood.m

package info (click to toggle)
dynare 4.6.3-4
  • links: PTS, VCS
  • area: main
  • in suites: bullseye
  • size: 74,896 kB
  • sloc: cpp: 98,057; ansic: 28,929; pascal: 13,844; sh: 5,947; objc: 4,236; yacc: 4,215; makefile: 2,583; lex: 1,534; fortran: 877; python: 647; ruby: 291; lisp: 152; xml: 22
file content (345 lines) | stat: -rw-r--r-- 14,510 bytes parent folder | download
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
303
304
305
306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
345
function [fval,info,exit_flag,grad,hess,SteadyState,trend_coeff,PHI_tilde,SIGMA_u_tilde,iXX,prior] = dsge_var_likelihood(xparam1,DynareDataset,DynareInfo,DynareOptions,Model,EstimatedParameters,BayesInfo,BoundsInfo,DynareResults)
% Evaluates the posterior kernel of the bvar-dsge model.
%
% INPUTS
%   o xparam1       [double]     Vector of model's parameters.
%   o gend          [integer]    Number of observations (without conditionning observations for the lags).
%
% OUTPUTS
%   o fval          [double]     Value of the posterior kernel at xparam1.
%   o info          [integer]    Vector of informations about the penalty.
%   o exit_flag     [integer]    Zero if the function returns a penalty, one otherwise.
%   o grad          [double]     place holder for gradient of the likelihood
%                                currently not supported by dsge_var
%   o hess          [double]     place holder for hessian matrix of the likelihood
%                                currently not supported by dsge_var
%   o SteadyState   [double]     Steady state vector possibly recomputed
%                                by call to dynare_resolve()
%   o trend_coeff   [double]     place holder for trend coefficients,
%                                currently not supported by dsge_var
%   o PHI_tilde     [double]     Stacked BVAR-DSGE autoregressive matrices (at the mode associated to xparam1);
%                                formula (28), DS (2004)
%   o SIGMA_u_tilde [double]     Covariance matrix of the BVAR-DSGE (at the mode associated to xparam1),
%                                formula (29), DS (2004)
%   o iXX           [double]     inv(lambda*T*Gamma_XX^*+ X'*X)
%   o prior         [double]     a matlab structure describing the dsge-var prior
%                                   - SIGMA_u_star: prior covariance matrix, formula (23), DS (2004)
%                                   - PHI_star: prior autoregressive matrices, formula (22), DS (2004)
%                                   - ArtificialSampleSize: number of artificial observations from the prior (T^* in DS (2004))
%                                   - DF = prior.ArtificialSampleSize - NumberOfParameters - NumberOfObservedVariables;
%                                   - iGXX_star: theoretical covariance of regressors ({\Gamma_{XX}^*}^{-1} in DS (2004))
%
% ALGORITHMS
%   Follows the computations outlined in Del Negro/Schorfheide (2004):
%   Priors from general equilibrium models for VARs, International Economic
%   Review, 45(2), pp. 643-673
%
% SPECIAL REQUIREMENTS
%   None.

% Copyright (C) 2006-2018 Dynare Team
%
% This file is part of Dynare.
%
% Dynare is free software: you can redistribute it and/or modify
% it under the terms of the GNU General Public License as published by
% the Free Software Foundation, either version 3 of the License, or
% (at your option) any later version.
%
% Dynare is distributed in the hope that it will be useful,
% but WITHOUT ANY WARRANTY; without even the implied warranty of
% MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
% GNU General Public License for more details.
%
% You should have received a copy of the GNU General Public License
% along with Dynare.  If not, see <http://www.gnu.org/licenses/>.

persistent dsge_prior_weight_idx

% Initialize some of the output arguments.
fval = [];
exit_flag = 1;
grad=[];
hess=[];
info = zeros(4,1);
PHI_tilde = [];
SIGMA_u_tilde = [];
iXX = [];
prior = [];
trend_coeff=[];

% Ensure that xparam1 is a column vector.
xparam1 = xparam1(:);

% Initialization of of the index for parameter dsge_prior_weight in Model.params.
if isempty(dsge_prior_weight_idx)
    dsge_prior_weight_idx = strmatch('dsge_prior_weight', Model.param_names);
end

% Get the number of estimated (dsge) parameters.
nx = EstimatedParameters.nvx + EstimatedParameters.np;

% Get the number of observed variables in the VAR model.
NumberOfObservedVariables = DynareDataset.vobs;

% Get the number of observations.
NumberOfObservations = DynareDataset.nobs;


% Get the number of lags in the VAR model.
NumberOfLags = DynareOptions.dsge_varlag;

% Get the number of parameters in the VAR model.
NumberOfParameters = NumberOfObservedVariables*NumberOfLags ;
if ~DynareOptions.noconstant
    NumberOfParameters = NumberOfParameters + 1;
end

% Get empirical second order moments for the observed variables.
mYY = evalin('base', 'mYY');
mYX = evalin('base', 'mYX');
mXY = evalin('base', 'mXY');
mXX = evalin('base', 'mXX');

% Return, with endogenous penalty, if some dsge-parameters are smaller than the lower bound of the prior domain.
if isestimation(DynareOptions) && DynareOptions.mode_compute ~= 1 && any(xparam1 < BoundsInfo.lb)
    k = find(xparam1 < BoundsInfo.lb);
    fval = Inf;
    exit_flag = 0;
    info(1) = 41;
    info(4)= sum((BoundsInfo.lb(k)-xparam1(k)).^2);
    return
end

% Return, with endogenous penalty, if some dsge-parameters are greater than the upper bound of the prior domain.
if isestimation(DynareOptions) && DynareOptions.mode_compute ~= 1 && any(xparam1 > BoundsInfo.ub)
    k = find(xparam1 > BoundsInfo.ub);
    fval = Inf;
    exit_flag = 0;
    info(1) = 42;
    info(4) = sum((xparam1(k)-BoundsInfo.ub(k)).^2);
    return
end

% Get the variance of each structural innovation.
Q = Model.Sigma_e;
for i=1:EstimatedParameters.nvx
    k = EstimatedParameters.var_exo(i,1);
    Q(k,k) = xparam1(i)*xparam1(i);
end
offset = EstimatedParameters.nvx;

% Update Model.params and Model.Sigma_e.
Model.params(EstimatedParameters.param_vals(:,1)) = xparam1(offset+1:end);
Model.Sigma_e = Q;

% Get the weight of the dsge prior.
dsge_prior_weight = Model.params(dsge_prior_weight_idx);

% Is the dsge prior proper?
if dsge_prior_weight<(NumberOfParameters+NumberOfObservedVariables)/NumberOfObservations
    fval = Inf;
    exit_flag = 0;
    info(1) = 51;
    info(2)=dsge_prior_weight;
    info(3)=(NumberOfParameters+NumberOfObservedVariables)/DynareDataset.nobs;
    info(4)=abs(NumberOfObservations*dsge_prior_weight-(NumberOfParameters+NumberOfObservedVariables));
    return
end

%------------------------------------------------------------------------------
% 2. call model setup & reduction program
%------------------------------------------------------------------------------

% Solve the Dsge model and get the matrices of the reduced form solution. T and R are the matrices of the
% state equation
[T,R,SteadyState,info,Model,DynareOptions,DynareResults] = dynare_resolve(Model,DynareOptions,DynareResults,'restrict');

% Return, with endogenous penalty when possible, if dynare_resolve issues an error code (defined in resol).
if info(1)
    if info(1) == 3 || info(1) == 4 || info(1) == 5 || info(1)==6 ||info(1) == 19 ||...
                info(1) == 20 || info(1) == 21 || info(1) == 23 || info(1) == 26 || ...
                info(1) == 81 || info(1) == 84 ||  info(1) == 85
        %meaningful second entry of output that can be used
        fval = Inf;
        info(4) = info(2);
        exit_flag = 0;
        return
    else
        fval = Inf;
        info(4) = 0.1;
        exit_flag = 0;
        return
    end
end

% Define the mean/steady state vector.
if ~DynareOptions.noconstant
    if DynareOptions.loglinear
        constant = transpose(log(SteadyState(BayesInfo.mfys)));
    else
        constant = transpose(SteadyState(BayesInfo.mfys));
    end
else
    constant = zeros(1,NumberOfObservedVariables);
end


%------------------------------------------------------------------------------
% 3. theoretical moments (second order)
%------------------------------------------------------------------------------

% Compute the theoretical second order moments
tmp0 = lyapunov_symm(T,R*Q*R',DynareOptions.lyapunov_fixed_point_tol,DynareOptions.qz_criterium,DynareOptions.lyapunov_complex_threshold, [], DynareOptions.debug);
mf  = BayesInfo.mf1;

% Get the non centered second order moments
TheoreticalAutoCovarianceOfTheObservedVariables = zeros(NumberOfObservedVariables,NumberOfObservedVariables,NumberOfLags+1);
TheoreticalAutoCovarianceOfTheObservedVariables(:,:,1) = tmp0(mf,mf)+constant'*constant;
for lag = 1:NumberOfLags
    tmp0 = T*tmp0;
    TheoreticalAutoCovarianceOfTheObservedVariables(:,:,lag+1) = tmp0(mf,mf) + constant'*constant;
end

% Build the theoretical "covariance" between Y and X
GYX = zeros(NumberOfObservedVariables,NumberOfParameters);
for i=1:NumberOfLags
    GYX(:,(i-1)*NumberOfObservedVariables+1:i*NumberOfObservedVariables) = TheoreticalAutoCovarianceOfTheObservedVariables(:,:,i+1);
end
if ~DynareOptions.noconstant
    GYX(:,end) = constant';
end

% Build the theoretical "covariance" between X and X
GXX = kron(eye(NumberOfLags), TheoreticalAutoCovarianceOfTheObservedVariables(:,:,1));
for i = 1:NumberOfLags-1
    tmp1 = diag(ones(NumberOfLags-i,1),i);
    tmp2 = diag(ones(NumberOfLags-i,1),-i);
    GXX = GXX + kron(tmp1,TheoreticalAutoCovarianceOfTheObservedVariables(:,:,i+1));
    GXX = GXX + kron(tmp2,TheoreticalAutoCovarianceOfTheObservedVariables(:,:,i+1)');
end

if ~DynareOptions.noconstant
    % Add one row and one column to GXX
    GXX = [GXX , kron(ones(NumberOfLags,1),constant') ; [  kron(ones(1,NumberOfLags),constant) , 1] ];
end

GYY = TheoreticalAutoCovarianceOfTheObservedVariables(:,:,1);

assignin('base','GYY',GYY);
assignin('base','GXX',GXX);
assignin('base','GYX',GYX);

iGXX = inv(GXX);
PHI_star = iGXX*transpose(GYX); %formula (22), DS (2004)
SIGMA_u_star=GYY - GYX*PHI_star; %formula (23), DS (2004)
[SIGMA_u_star_is_positive_definite, penalty] = ispd(SIGMA_u_star);
if ~SIGMA_u_star_is_positive_definite
    fval = Inf;
    info(1) = 53;
    info(4) = penalty;
    exit_flag = 0;
    return
end

if ~isinf(dsge_prior_weight)% Evaluation of the likelihood of the dsge-var model when the dsge prior weight is finite.
    tmp0 = dsge_prior_weight*NumberOfObservations*TheoreticalAutoCovarianceOfTheObservedVariables(:,:,1) + mYY ;  %first term of square bracket in formula (29), DS (2004)
    tmp1 = dsge_prior_weight*NumberOfObservations*GYX + mYX;        %first element of second term of square bracket in formula (29), DS (2004)
    tmp2 = inv(dsge_prior_weight*NumberOfObservations*GXX+mXX);     %middle element of second term of square bracket in formula (29), DS (2004)
    SIGMA_u_tilde = tmp0 - tmp1*tmp2*tmp1';                               %square bracket term in formula (29), DS (2004)
    clear('tmp0');
    [SIGMAu_is_positive_definite, penalty] = ispd(SIGMA_u_tilde);
    if ~SIGMAu_is_positive_definite
        fval = Inf;
        info(1) = 52;
        info(4) = penalty;
        exit_flag = 0;
        return
    end
    SIGMA_u_tilde = SIGMA_u_tilde / (NumberOfObservations*(1+dsge_prior_weight));   %prefactor of formula (29), DS (2004)
    PHI_tilde = tmp2*tmp1';                                                   %formula (28), DS (2004)
    clear('tmp1');
    prodlng1 = sum(gammaln(.5*((1+dsge_prior_weight)*NumberOfObservations- ...
                               NumberOfParameters ...
                               +1-(1:NumberOfObservedVariables)')));    %last term in numerator of third line of (A.2), DS (2004)
    prodlng2 = sum(gammaln(.5*(dsge_prior_weight*NumberOfObservations- ...
                               NumberOfParameters ...
                               +1-(1:NumberOfObservedVariables)')));    %last term in denominator of third line of (A.2), DS (2004)
                                                                        %Compute minus log likelihood according to (A.2), DS (2004)
    lik = .5*NumberOfObservedVariables*log(det(dsge_prior_weight*NumberOfObservations*GXX+mXX)) ... %first term in numerator of second line of (A.2), DS (2004)
          + .5*((dsge_prior_weight+1)*NumberOfObservations-NumberOfParameters)*log(det((dsge_prior_weight+1)*NumberOfObservations*SIGMA_u_tilde)) ... %second term in numerator of second line of (A.2), DS (2004)
          - .5*NumberOfObservedVariables*log(det(dsge_prior_weight*NumberOfObservations*GXX)) ... %first term in denominator of second line of (A.2), DS (2004)
          - .5*(dsge_prior_weight*NumberOfObservations-NumberOfParameters)*log(det(dsge_prior_weight*NumberOfObservations*SIGMA_u_star)) ... %second term in denominator of second line of (A.2), DS (2004)
          + .5*NumberOfObservedVariables*NumberOfObservations*log(2*pi)  ... %first term in numerator of third line of (A.2), DS (2004)
          - .5*log(2)*NumberOfObservedVariables*((dsge_prior_weight+1)*NumberOfObservations-NumberOfParameters) ... %second term in numerator of third line of (A.2), DS (2004)
          + .5*log(2)*NumberOfObservedVariables*(dsge_prior_weight*NumberOfObservations-NumberOfParameters) ... %first term in denominator of third line of (A.2), DS (2004)
          - prodlng1 + prodlng2;
else% Evaluation of the likelihood of the dsge-var model when the dsge prior weight is infinite.
    PHI_star = iGXX*transpose(GYX);
    %Compute minus log likelihood according to (33), DS (2004) (where the last term in the trace operator has been multiplied out)
    lik = NumberOfObservations * ( log(det(SIGMA_u_star)) + NumberOfObservedVariables*log(2*pi) +  ...
                                   trace(inv(SIGMA_u_star)*(mYY - transpose(mYX*PHI_star) - mYX*PHI_star + transpose(PHI_star)*mXX*PHI_star)/NumberOfObservations));
    lik = .5*lik;% Minus likelihood
    SIGMA_u_tilde=SIGMA_u_star;
    PHI_tilde=PHI_star;
end

if isnan(lik)
    fval = Inf;
    info(1) = 45;
    info(4) = 0.1;
    exit_flag = 0;
    return
end

if imag(lik)~=0
    fval = Inf;
    info(1) = 46;
    info(4) = 0.1;
    exit_flag = 0;
    return
end

% Add the (logged) prior density for the dsge-parameters.
lnprior = priordens(xparam1,BayesInfo.pshape,BayesInfo.p6,BayesInfo.p7,BayesInfo.p3,BayesInfo.p4);
fval = (lik-lnprior);

if isnan(fval)
    fval = Inf;
    info(1) = 47;
    info(4) = 0.1;
    exit_flag = 0;
    return
end

if imag(fval)~=0
    fval = Inf;
    info(1) = 48;
    info(4) = 0.1;
    exit_flag = 0;
    return
end

if isinf(fval)~=0
    fval = Inf;
    info(1) = 50;
    info(4) = 0.1;
    exit_flag = 0;
    return
end

if (nargout >= 10)
    if isinf(dsge_prior_weight)
        iXX = iGXX;
    else
        iXX = tmp2;
    end
end

if (nargout==11)
    prior.SIGMA_u_star = SIGMA_u_star;
    prior.PHI_star = PHI_star;
    prior.ArtificialSampleSize = fix(dsge_prior_weight*NumberOfObservations);
    prior.DF = prior.ArtificialSampleSize - NumberOfParameters - NumberOfObservedVariables;
    prior.iGXX_star = iGXX;
end