1.1. Restrictions on parameters during estimation

Sometimes we need to set additional restrictions on parameters during estimation. For instance, in a regime switching model, one may need a normalization assumption in order to label the states. All kinds of functions of both estimated and non-estimated parameters are allowed as long as those functions are known to Matlab or on the Matlab path.

There is a way of setting these restriction in the model file of a DSGE model. However, setting these restrictions outside the model file as is done below should be preferred.

In this case, the restrictions are organized in a cell array

restrictions={
        'f1(theta)>=f2(theta)'
        ...
        'h1(theta)<=h2(theta)'
        };

and passed along to the model object using option estim_nonlinear_restrictions. See the section on estimation for more detail.