Re: [Gretl-devel] VECM restrictions and scaling
A few more thoughts.
On Sun, 16 Sep 2007, Sven Schreiber wrote:
Next, with some overidentifying restrictions on beta (both
exclusion and more general restrictions, partly also applied to
the restricted exogenous variable, and apart from
normalization), gretl's results are not so good (I also append
pcgive's results for comparison):
<gretl>
Rank of Jacobian = 34, number of free parameters = 34
Model is fully identified
Based on Jacobian, df = 2
Switching algorithm: 29552 iterations ...
When the switching algorithm takes thousands of iterations, it's a
pretty safe bet that the results will not be good. I haven't
seen that happen lately (since adding the scale-removal code),
but clearly you've got a case here that is not handled correctly
in gretl.
So I tried out something more modest: removing the restricted
exogenous variable and imposing some just-identifying but
somewhat unusual restrictions...
<gretl>
Rank of Jacobian = 32, number of free parameters = 32
Model is fully identified
Based on Jacobian, df = 0
Switching algorithm: 2319 iterations
-(T/2)log|Omega| = 1855.6699, lldiff = 3.99838e-011
Unrestricted loglikelihood (lu) = 910.76493
Restricted loglikelihood (lr) = 910.65685
</gretl>
I suppose we need a check: if df = 0, and yet the "restricted"
likelihood is less than the unrestricted, then clearly something
has gone awry. Again, I haven't seen a result of this sort, but
then I haven't yet tried a wide range of test cases.
Allin.