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Belief Coefficients

 

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Compute the update estimates of the belief coefficients in the perceived law of motion (PLM) at the initial values, the DSGE posterior mode or the posterior mode values. If the naive belief system is used, the belief coefficients will be given by the constant term, the persistence coefficient (sum of the two lag coefficients) and the growth coefficient (minus the second lag coefficient). When a user defined belief system is applied, then the belief coefficients will not be transformed. The graph below shows the latter type of belief coefficient estimates and where the PLM is given by a VAR(2) model for the two forward looking variables. The former case is exemplified by Figure 1 in Slobodyan and Wouters (2012).

 

Additional Information

A more detailed description about belief coefficient estimation can be found in Sections 17.1.2-17.5 of the YADA Manual.

 

 

 


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