of the GNU Free Documentation License, Version or any later version published by the Free Software Foundation; with no Invariant. Dynare can implement the ‘diffuse Kalman filter’ needed in situations in which an The following instructions implement this model in Dynare. DYNARE. User Guide. An introduction to the solution & estimation of DSGE models. Tommaso Mancini Griffoli, Dynare v4 – User Guide Public beta.

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Dybare copy of the license can be found at: Deterministic vs stochastic models Introducing an example Dynare. How does dynare solve stochastic DSGE models? This is the second version of the Dynare User Guide which is still work in progress!

This means two things. First, please read this with a critical eye and send me comments! Are some areas unclear? Is anything plain wrong? Are some sections too wordy, are there enough examples, are these clear? On the contrary, are there certain parts that just click particularly well? How can others be improved? I m very interested to get your feedback.

The second thing that a work in progress manuscript comes with is a few internal notes. These are mostly placeholders for future work, notes to myself or others of the Dynare development team, or at times notes to you – our readers – to highlight a feature not yet fully stable. Thanks very much for your gyide and good ideas. Please write either direclty to myself: Finally, the development of Dynare could not have come such a long ways withough an active community of users who continually pose questions, report bugs and suggest new features.

The help of this community is gratefully acknowledged. The addresses above are provided in case you wish to contact any one of the authors of Dynare directly. We nonetheless encourage you to first use the Dynare forums to ask your questions so that other users can benefit from them as well; remember, almost no question is specific enough to interest just one person, and yours is not the exception!

To do so, this Guide is structured around examples and offers practical advice. To root this understanding more deeply, though, this Guide also gives some background on Dynare s algorithms, methodologies and underlying theory. This Guide will focus on the most common or useful features of the program, thus emphasizing depth over breadth. This Guide is written mainly for an advanced economist – like a professor, graduate student or central banker – needing a powerful and flexible program to support and facilitate his or her research activities in a variety of fields.

The sophisticated computer programmer, on the one hand, or the specialist of computational economics, on the other, may not find this Guide sufficiently detailed.

We recognize that the advanced economist may be either a beginning or intermediate user of Dynare. This Guide is written to accommodate both. If you re new to Dynare, we recommend starting with chapters 3 and 5, which introduce the program s basic features to solve including running impulse response functions and estimate DSGE models, respectively.

Once you have read these two chapters, you will know the crux of Dynare s functionality and hopefully! At that point, though, you will probably find yourself coming back to the User Guide to skim over some of the content in the advanced chapters to iron out details and potential complications you may run into.

If you re instead an intermediate user of Dynare, you will most likely find the advanced chapters, 4 and 6, more appropriate. These chapters cover more advanced features of Dynare and more complicated usage scenarios.


The presumption is that you would skip around these chapters to focus on the topics most applicable to your needs and curiosity. Examples are therefore more concise and specific to each feature; these chapters read a bit more like a reference manual. We also recognize that you probably have had repeated if not active exposure to programming and are likely to have a strong economic background.

Thus, a black box solution to your needs is inadequate. To hopefully address this issue, the User Guide goes into some depth in covering the theoretical underpinnings and methodologies that Dynare follows to solve and estimate DSGE models.

These are available in the behind the scenes of Dynare chapters 7 and 8. These chapters can also serve as a basic primer if you are new to the practice of DSGE model solving and Bayesian estimation. Finally, besides breaking up content into short chapters, we ve introduced two different markers throughout the Guide to help streamline your reading. Before we dive into the thick of the trees, let s have a look at the forest from the top Dynare is a powerful and highly customizable engine, with an intuitive front-end interface, to solve, simulate and estimate DSGE models.

In slightly less flowery words, it is a pre-processor and a collection of Matlab routines that has the great advantages of reading DSGE model equations written almost as in an academic paper.

This not only facilitates the inputting of a model, but also enables you to easily share your code as it is straightforward to read by anyone. Basically, the model and its related attributes, like a shock structure for instance, is written ueer by equation in an editor of your choice.

The resulting file will be called the. That file is then called from Matlab.

This initiates the Dynare pre-processor which translates the. Finally, results are presented in Matlab.

Some more details on the internal files generated by Dynare is given in section 4. Each of these steps will become clear as you read through the User Guide, but for now it may be helpful to summarize what Dynare is able to do:.

DYNARE User Guide. An introduction to the solution & estimation of DSGE models

At your disposal, you have the following additional sources of help: The User Guide will often introduce you to a command in a rather loose manner mainly through examples ; so reading corresponding command descriptions in the Reference Manual is a good idea to cover all relevant details. Besides allowing you to stay up to date with the most recent papers and possibly make new contacts, it conveniently lists conferences, workshops and seminars that may be of interest.

Many of these are shared with the Reference Manual. Integer indicates an integer number. Double indicates a double precision number. The following syntaxes are valid: Gukde name indicates a variable name. These must start with an alphabetical character and can only contain other alphabetical characters and digits, as well as underscores. All other gujde, including accents, and spaces, are forbidden.

Parameter name indicates a parameter name which must follow the same naming conventions as dynarre. Filename indicates a file name valid in your operating system. Note that Matlab requires that names of files or functions start with alphabetical characters; this concerns your Dynare.

Command is an instruction to Dynare or other program when specified. Options or optional arguments for a command are listed in square brackets [ ] unless otherwise noted. If, for instance, the option must be specified in parenthesis in Dynare, it will show up in the Guide as [ option ]. Typewritten text indicates text as it guid appear in Dynare code. With respect to version 3, this use version introduces several important features, as well as improvements, optimizations of routines and bug fixes.


The major new features are the following: Analytical derivatives are now used everywhere for instance, in the Newton algorithm for deterministic models and in xynare linearizations necessary to solve stochastic models. This increases computational speed significantly. The drawback is that Dynare can now handle only a limited set of functions, although in nearly all economic applications this should not be a constraint.

Recall that in version 3, variables and parameters where at times in their order of declaration and at times in alphabetical order. This may cause some problems of backward compatibility if guire wrote programs to run off Dynare v3 eynare.

The names of many internal variables and the organization of output variables has changed.

These are enumerated in details in the relevant chapters. The names of the files internally generated by Dynare have also changed.

This is covered in more details in chapter 3, in section NOTE! You will unfortunately have to slightly amend any old steady state files you may have written.

Several large-scale improvements have been implemented to speed up Dynare. This should be most noticeable when dynnare deterministic models, but also apparent in other functionality.

User Guide — Dynare

There used to be versions of Dynare for Scilab and Gauss. Development of the Scilab version stopped after Dynare version 3. This User Guide will exclusively focus on Dynare version 4. If you have questions about the support of a particular platform, please ask your question on Dynare forums.

Depending on the type of computations required, like the very processor intensive Metropolis Hastings algorithm, you may need up to 1GB of RAM to obtain acceptable computational times. In fact, no additional toolbox is necessary for running most of Dynare, except maybe for optimal simple rules see chapter 9but even then remedies exist see the Dynare forums for discussions on this, or to ask your particular question.

But if you do have the optimization toolbox installed, you will have additional options for solving for the steady state solve algo option and for searching for the posterior mode mode compute optionboth of which are defined later.

That is to say that the term solution in the title of the chapter is used rather broadly. You may be interested in simply finding the solution functions to a set of first order conditions stemming from your model, but you may also want to go a bit further. Typically, you may be interested in how this system behaves in response to shocks, whether temporary or permanent. Likewise, you may want to explore how the system comes back to its steady state or moves to a new one. This chapter covers all these topics.

But instead of skipping to the topic closest to your needs, we recommend that you read this chapter chronologically, to learn basic Dynare commands and the process of writing a proper. This distinction will appear throughout the chapter; in fact, it is so fundamental, that we considered writing separate chapters altogether. But the amount of common material – Dynare commands and syntax – is notable and writing two chapters would have been overly repetitive. Enough suspense; here is the important question: The distinction hinges on whether future shocks are known.