49 lines
1.5 KiB
Modula-2
49 lines
1.5 KiB
Modula-2
// this program estimates the model in
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// "The Demand for Money during Hyperinflations under Rational Expectations: I" by T. Sargent, IER 1977 using Bayesian techniques
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// variables are defined as follows:
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// x=p_t-p_{t-1}, p being the log of the price level
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// mu=m_t-m_{t-1}, m being the log of money supply
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// note that in contrast to the paper eta and epsilon have variance 1 (they are multiplied by the standard deviations)
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var x mu a1 a2;
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varexo epsilon eta;
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parameters alpha lambda sig_eta sig_epsilon;
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lambda=.5921;
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alpha=-2.344;
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sig_eta=.001;
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sig_epsilon=.001;
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model;
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x=x(-1)-lambda*a1(-1)+(1/(lambda+alpha*(1-lambda)))*sig_epsilon*epsilon-(1/(lambda+alpha*(1-lambda)))*sig_eta*eta;
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mu=(1-lambda)*x(-1)+lambda*mu(-1)-lambda*a2(-1)+(1+alpha*(1-lambda))/(lambda+alpha*(1-lambda))*sig_epsilon*epsilon-(1-lambda)/(lambda+alpha*(1-lambda))*sig_eta*eta;
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a1=(1/(lambda+alpha*(1-lambda)))*sig_epsilon*epsilon-(1/(lambda+alpha*(1-lambda)))*sig_eta*eta;
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a2=(1+alpha*(1-lambda))/(lambda+alpha*(1-lambda))*sig_epsilon*epsilon-(1-lambda)/(lambda+alpha*(1-lambda))*sig_eta*eta;
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end;
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steady;
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shocks;
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var eta;
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stderr 1;
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var epsilon;
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stderr 1;
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end;
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estimated_params;
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// Bayesian setup
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lambda, uniform_pdf, 0.68, .5;
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alpha, uniform_pdf, -5, 2;
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sig_eta, uniform_pdf, .5, 0.25;
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sig_epsilon, uniform_pdf, .5, 0.25;
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end;
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varobs mu x;
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unit_root_vars x;
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estimation(datafile=cagan_data,first_obs=1,nobs=34,mh_replic=25000,mh_nblocks=1,mh_jscale=1,mode_compute=4);
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