Merge remote-tracking branch 'origin/master' into dr1break

1fcf708b · MichelJuillard · 80ca47d6 · 4ba016cc · 1fcf708b · 1fcf708b
Commit 1fcf708b authored Mar 10, 2012 by MichelJuillard
--- a/configure.ac
+++ b/configure.ac
 dnl Process this file with autoconf to produce a configure script.

-dnl Copyright (C) 2009-2011 Dynare Team
+dnl Copyright (C) 2009-2012 Dynare Team
 dnl
 dnl This file is part of Dynare.
 dnl
@@ -30,7 +30,7 @@ case ${host_os} in
  *mingw32*)
    # On mingw32, we don't want dynamic libgcc
    # Note that static-libstdc++ is only supported since GCC 4.5 (but generates no error on older versions)
-    LDFLAGS="$LDFLAGS -static-libgcc -static-libstdc++"
+    LDFLAGS="$LDFLAGS -static-libgcc -static-libstdc++ -static-libgfortran"
    have_windows="yes"
    ;;
  *cygwin*)
@@ -155,6 +155,15 @@ AC_CHECK_PROG([CWEAVE], [cweave], [cweave])
 AM_CONDITIONAL([HAVE_CWEAVE], [test "x$CWEAVE" != "x"])

 AC_PROG_F77
+AC_F77_LIBRARY_LDFLAGS
+# Hack to get static linking of libgfortran on MinGW
+# (-static-libgfortran doesn't act on gcc/g++)
+case ${host_os} in
+  *mingw32*)
+    FLIBS=`echo $FLIBS | sed 's/-lgfortran/-Wl,-Bstatic -lgfortran -Wl,-Bdynamic/'`
+    ;;
+esac
+
 if test "x$F77" != "x"; then
   AX_BLAS
   AX_LAPACK

--- a/doc/dynare.texi
+++ b/doc/dynare.texi
@@ -295,15 +295,15 @@ Stéphane Adjemian (Université du Maine, Gains and Cepremap), Houtan
 Bastani (Cepremap), Michel Juillard (Banque de France), Frédéric Karamé
 (Université d'Évry, Epee and Cepremap), Junior Maih (Norges Bank),
 Ferhat Mihoubi (Université d'Évry, Epee and Cepremap), George Perendia,
-Marco Ratto (JRC) and Sébastien Villemot (Cepremap and Paris School of
-Economics). Increasingly, the developer base is expanding, as tools
-developed by researchers outside of Cepremap are integrated into
-Dynare. Financial support is provided by Cepremap, Banque de France and
-DSGE-net (an international research network for DSGE modeling). The
-Dynare project also received funding through the Seventh Framework
-Programme for Research (FP7) of the European Commission's Socio-economic
-Sciences and Humanities (SSH) Program from October 2008 to September
-2011 under grant agreement SSH-CT-2009-225149.
+Johannes Pfeifer, Marco Ratto (JRC) and Sébastien Villemot (Cepremap and
+Paris School of Economics). Increasingly, the developer base is
+expanding, as tools developed by researchers outside of Cepremap are
+integrated into Dynare. Financial support is provided by Cepremap,
+Banque de France and DSGE-net (an international research network for
+DSGE modeling). The Dynare project also received funding through the
+Seventh Framework Programme for Research (FP7) of the European
+Commission's Socio-economic Sciences and Humanities (SSH) Program from
+October 2008 to September 2011 under grant agreement SSH-CT-2009-225149.

 Interaction between developers and users of Dynare is central to the
 project. A @uref{http://www.dynare.org/phpBB3, web forum} is available
@@ -3888,6 +3888,9 @@ Uses Dynare implementation of the Nelder-Mead simplex based optimization
 routine (generally more efficient than the MATLAB or Octave implementation
 available with @code{mode_compute=7})

+@item 9
+Uses the CMA-ES (Covariance Matrix Adaptation Evolution Strategy) algorithm, an evolutionary algorithm for difficult non-linear non-convex optimization 
+
 @item @var{FUNCTION_NAME}
 It is also possible to give a @var{FUNCTION_NAME} to this option,
 instead of an @var{INTEGER}. In that case, Dynare takes the return
@@ -3988,6 +3991,7 @@ and graphics that can be later directly included in LaTeX files (not
 yet implemented)

 @item kalman_algo = @var{INTEGER}
+@anchor{kalman_algo}
 @dots{}

 @item kalman_tol = @var{DOUBLE}
@@ -5263,6 +5267,9 @@ Critical value for correlation @math{\rho}: plot couples of parmaters with
 @item mode_file = @var{FILENAME}
 @xref{mode_file}.

+@item kalman_algo = @var{INTEGER}
+@xref{kalman_algo}.
+
 @end table
 @customhead{Identification Analysis Options}
 @table @code
@@ -5290,6 +5297,9 @@ for identification analysis. Default: @code{0}
 @item ar = @var{INTEGER}
 Maximum number of lags for moments in identification analysis. Default: @code{1}

+@item lik_init = @var{INTEGER}
+@xref{lik_init}.
+
 @end table

 @end deffn
@@ -5357,6 +5367,9 @@ Specify the parameter set to use. Default: @code{prior_mean}
 @item lik_init = @var{INTEGER}
 @xref{lik_init}.

+@item kalman_algo = @var{INTEGER}
+@xref{kalman_algo}.
+
 @end table

 @end deffn
@@ -5841,20 +5854,17 @@ model. Output @code{.eps} files are contained in
 @xref{simulation_file_tag}.

 @item horizon = @var{INTEGER}
-The forecast horizon. Default: @code{12}
+@anchor{horizon} The forecast horizon. Default: @code{12}

 @item filtered_probabilities
 @anchor{filtered_probabilities} Uses filtered probabilities at the end
-of the sample as initial conditions for regime probabilities. Default:
-@code{off}
-
-@item no_error_bands
-@anchor{no_error_bands} Do not output error bands. Default: @code{off}
-(@i{i.e.} output error bands)
+of the sample as initial conditions for regime probabilities. Only one
+of @code{filtered_probabilities}, @code{regime} and @code{regimes} may
+be passed. Default: @code{off}

 @item error_band_percentiles = [@var{DOUBLE1} @dots{}]
 @anchor{error_band_percentiles} The percentiles to compute. Default:
-@code{[0.16 0.50 0.84]}. If @code{no_error_bands} is passed, the default
+@code{[0.16 0.50 0.84]}. If @code{median} is passed, the default
 is @code{[0.5]}

 @item shock_draws = @var{INTEGER}
@@ -5873,11 +5883,25 @@ draws in posterior draws file are used. Default: @code{1}
 @anchor{free_parameters} A vector of free parameters to initialize theta
 of the model. Default: use estimated parameters

-@item median
-@anchor{median}
+@item parameter_uncertainty
+@anchor{parameter_uncertainty} Calculate IRFs under parameter
+uncertainty. Requires that @command{ms_simulation} has been
+run. Default: @code{off}

-A shortcut to setting @code{error_band_percentiles=[0.5]}. Default:
-@code{off}
+@item regime = @var{INTEGER}
+@anchor{regime} Given the data and model parameters, what is the ergodic
+probability of being in the specified regime. Only one of
+@code{filtered_probabilities}, @code{regime} and @code{regimes} may be
+passed. Default: @code{off}
+
+@item regimes
+@anchor{regimes} Describes the evolution of regimes. Only one of
+@code{filtered_probabilities}, @code{regime} and @code{regimes} may be
+passed. Default: @code{off}
+
+@item median
+@anchor{median} A shortcut to setting
+@code{error_band_percentiles=[0.5]}. Default: @code{off}

 @end table

@@ -5909,9 +5933,6 @@ while data files are contained in @code{<output_file_tag/Forecast>}.
 @item data_obs_nbr = @var{INTEGER}
 The number of data points included in the output. Default: @code{0}

-@item no_error_bands
-@xref{no_error_bands}.
-
 @item error_band_percentiles = [@var{DOUBLE1} @dots{}]
 @xref{error_band_percentiles}.

@@ -5927,6 +5948,16 @@ The number of data points included in the output. Default: @code{0}
 @item free_parameters = @var{NUMERICAL_VECTOR}
 @xref{free_parameters}.

+@item parameter_uncertainty
+@xref{parameter_uncertainty}.
+
+@item regime = @var{INTEGER}
+@xref{regime}.
+
+@item regimes
+
+@xref{regimes}.
+
 @item median

 @xref{median}.
@@ -5959,11 +5990,15 @@ are contained in @code{<output_file_tag/Variance_Decomposition>}.
 @item simulation_file_tag = @var{FILENAME}
 @xref{simulation_file_tag}.

+@item horizon = @var{INTEGER}
+@xref{horizon}.
+
 @item filtered_probabilities
 @xref{filtered_probabilities}.

 @item no_error_bands
-@xref{no_error_bands}.
+Do not output percentile error bands (@i{i.e.} compute mean). Default:
+@code{off} (@i{i.e.} output error bands)

 @item error_band_percentiles = [@var{DOUBLE1} @dots{}]
 @xref{error_band_percentiles}.
@@ -5980,9 +6015,15 @@ are contained in @code{<output_file_tag/Variance_Decomposition>}.
 @item free_parameters = @var{NUMERICAL_VECTOR}
 @xref{free_parameters}.

-@item median
+@item parameter_uncertainty
+@xref{parameter_uncertainty}.

-@xref{median}.
+@item regime = @var{INTEGER}
+@xref{regime}.
+
+@item regimes
+
+@xref{regimes}.

 @end table

@@ -6075,7 +6116,7 @@ line. The main directives are:
 @item
 @code{@@#define}, for defining a macro-processor variable,
 @item
-@code{@@#if}, @code{@@#then}, @code{@@#else}, @code{@@#endif} for
+@code{@@#if}, @code{@@#ifdef}, @code{@@#else}, @code{@@#endif} for
 conditional statements,
 @item
 @code{@@#for}, @code{@@#endfor} for constructing loops.
@@ -6218,13 +6259,15 @@ end;
 @end deffn

 @deffn {Macro directive} @@#if @var{MACRO_EXPRESSION}
+@deffnx {Macro directive} @@#ifdef @var{MACRO_VARIABLE}
 @deffnx {Macro directive} @@#else
 @deffnx {Macro directive} @@#endif
 Conditional inclusion of some part of the @file{.mod} file.
-The lines between @code{@@#if} and the next @code{@@#else} or
-@code{@@#end} is executed only if the condition evaluates to a
-non-null integer. The @code{@@#else} branch is optional and, if
-present, is only evaluated if the condition evaluates to @code{0}.
+The lines between @code{@@#if} or @code{@@#ifdef} and the next
+@code{@@#else} or @code{@@#endif} is executed only if the condition
+evaluates to a non-null integer. The @code{@@#else} branch is optional
+and, if present, is only evaluated if the condition evaluates to
+@code{0}.

 @examplehead

@@ -6242,6 +6285,23 @@ model;
 end;
 @end example

+@examplehead
+
+Choose between two alternative monetary policy rules using a
+macro-variable. As @code{linear_mon_pol} was not previously defined in
+this example, the second equation will be chosen:
+
+@example
+model;
+@@#ifdef linear_mon_pol
+  i = w*i(-1) + (1-w)*i_ss + w2*(pie-piestar);
+@@#else
+  i = i(-1)^w * i_ss^(1-w) * (pie/piestar)^w2;
+@@#endif
+...
+end;
+@end example
+
 @end deffn

 @deffn {Macro directive} @@#for @var{MACRO_VARIABLE} in @var{MACRO_EXPRESSION}

--- a/doc/gsa/gsa.tex
+++ b/doc/gsa/gsa.tex
@@ -8,6 +8,8 @@
 \usepackage{psfrag}
 \usepackage{setspace}
 \usepackage{rotating}
+\usepackage{hyperref}
+\hypersetup{breaklinks=true,pagecolor=white,colorlinks=true,linkcolor=blue,citecolor=blue,urlcolor=blue}
 %\singlespacing (interlinea singola)
 %\onehalfspacing (interlinea 1,5)
 %\doublespacing (interlinea doppia)
@@ -20,7 +22,13 @@
 \begin{document}

 % ----------------------------------------------------------------
-\title{Sensitivity Analysis Toolbox for DYNARE}%
+\title{Sensitivity Analysis Toolbox for DYNARE\thanks{Copyright \copyright~2012 Dynare
+    Team. Permission is granted to copy, distribute and/or modify
+    this document under the terms of the GNU Free Documentation
+    License, Version 1.3 or any later version published by the Free
+    Software Foundation; with no Invariant Sections, no Front-Cover
+    Texts, and no Back-Cover Texts. A copy of the license can be found
+    at: \url{http://www.gnu.org/licenses/fdl.txt}}}

 \author{Marco Ratto\\
 European Commission, Joint Research Centre \\

--- a/doc/macroprocessor/macroprocessor.tex
+++ b/doc/macroprocessor/macroprocessor.tex
@@ -65,7 +65,7 @@
    \begin{itemize}
    \item file inclusion
    \item loops (\textit{for} structure)
-    \item conditional inclusion (\textit{if/then/else} structures)
+    \item conditional inclusion (\textit{if/else} structures)
    \item expression substitution
    \end{itemize}
  \item Implemented in Dynare starting from version 4.0
@@ -95,7 +95,7 @@
    \begin{itemize}
    \item file inclusion: \verb+@#include+
    \item definition a variable of the macro-processor: \verb+@#define+
-    \item conditional statements (\verb+@#if/@#then/@#else/@#endif+)
+    \item conditional statements (\verb+@#if/@#else/@#endif+)
    \item loop statements (\verb+@#for/@#endfor+)
    \end{itemize}
  \item In most cases, directives occupy exactly one line of text. In case of need, two anti-slashes (\verb+\\+) at the end of the line indicates that the directive is continued on the next line.

--- a/license.txt
+++ b/license.txt
--- a/matlab/cmaes.m
+++ b/matlab/cmaes.m
--- a/matlab/distributions/inverse_gamma_specification.m
+++ b/matlab/distributions/inverse_gamma_specification.m
@@ -44,7 +44,7 @@ function [s,nu] = inverse_gamma_specification(mu,sigma,type,use_fzero_flag)
 %! @end deftypefn
 %@eod:

-% Copyright (C) 2003-2011 Dynare Team
+% Copyright (C) 2003-2012 Dynare Team
 %
 % This file is part of Dynare.
 %
@@ -99,7 +99,7 @@ elseif type == 1;   % Inverse Gamma 1
                end
            end
            % Solve for nu using the secant method.
-            while abs(nu2-nu1) > 1e-8
+            while abs(nu2/nu1-1) > 1e-14
                if err > 0
                    nu1 = nu;
                    if nu < nu2
@@ -117,10 +117,10 @@ elseif type == 1;   % Inverse Gamma 1
        end
        s = (sigma2+mu2)*(nu-2);
        if check_solution_flag
-            if abs(mu-sqrt(s/2)*gamma((nu-1)/2)/gamma(nu/2))>1e-9
+            if abs(log(mu)-log(sqrt(s/2))-gammaln((nu-1)/2)+gammaln(nu/2))>1e-7
                error('inverse_gamma_specification:: Failed in solving for the hyperparameters!');
            end
-            if abs(sigma-sqrt(s/(nu-2)-mu^2))>1e-9
+            if abs(sigma-sqrt(s/(nu-2)-mu^2))>1e-7
                error('inverse_gamma_specification:: Failed in solving for the hyperparameters!');
            end
        end

--- a/matlab/dr1.m
+++ b/matlab/dr1.m
-function [dr,info,M_,options_,oo_] = dr1(dr,task,M_,options_,oo_)
+function [dr,info] = dr1(dr,task,M_,options_,oo_)
 % function [dr,info,M_,options_,oo_] = dr1(dr,task,M_,options_,oo_)
 % computes the reduced form solution of a rational expectation model (first or second order
 % approximation of the stochastic model around the deterministic steady state). 
@@ -21,9 +21,6 @@ function [dr,info,M_,options_,oo_] = dr1(dr,task,M_,options_,oo_)
 %                                         indeterminacy.
 %                                 info=5: BK rank condition not satisfied.
 %                                 info=6: The jacobian matrix evaluated at the steady state is complex.        
-%   M_         [matlab structure]            
-%   options_   [matlab structure]
-%   oo_        [matlab structure]
 %  
 % ALGORITHM
 %   ...
@@ -61,7 +58,6 @@ end
 if options_.k_order_solver;
    dr = set_state_space(dr,M_);
    [dr,info] = k_order_pert(dr,M_,options_,oo_);
-    oo_.dr = dr;
    return;
 end

@@ -72,20 +68,12 @@ iyv = iyv(:);
 iyr0 = find(iyv) ;
 it_ = M_.maximum_lag + 1 ;

-if M_.exo_nbr == 0
-    oo_.exo_steady_state = [] ;
-end
-
 klen = M_.maximum_lag + M_.maximum_lead + 1;
 iyv = lead_lag_incidence';
 iyv = iyv(:);
 iyr0 = find(iyv) ;
 it_ = M_.maximum_lag + 1 ;

-if M_.exo_nbr == 0
-    oo_.exo_steady_state = [] ;
-end
-
 it_ = M_.maximum_lag + 1;
 z = repmat(dr.ys,1,klen);
 if ~options_.bytecode

--- a/matlab/dr_block.m
+++ b/matlab/dr_block.m
@@ -567,7 +567,9 @@ for i = 1:Size;
                if block_type == 5
                    vghx_other = - inv(kron(eye(size(D_,2)), A_) + kron(C_', B_)) * vec(D_);
                    ghx_other = reshape(vghx_other, size(D_,1), size(D_,2));
-                else
+                elseif options_.sylvester_fp == 1
+                    ghx_other = gensylv_fp(A_, B_, C_, D_, i);
+                else 
                    [err, ghx_other] = gensylv(1, A_, B_, C_, -D_);
                end;
                if options_.aim_solver ~= 1 && options_.use_qzdiv
@@ -650,7 +652,7 @@ for i = 1:Size;
        end
    end;
    if task ~=1
-        if (maximum_lag > 0 && n_pred > 0)
+        if (maximum_lag > 0 && (n_pred > 0 || n_both > 0))
            sorted_col_dr_ghx = M_.block_structure.block(i).sorted_col_dr_ghx;
            dr.ghx(endo, sorted_col_dr_ghx) = dr.ghx(endo, sorted_col_dr_ghx) + ghx;
            data(i).ghx = ghx;

--- a/matlab/dsge_likelihood.m
+++ b/matlab/dsge_likelihood.m
@@ -127,17 +127,21 @@ function [fval,exit_flag,ys,trend_coeff,info,Model,DynareOptions,BayesInfo,Dynar
 % AUTHOR(S) stephane DOT adjemian AT univ DASH lemans DOT FR

 % Declaration of the penalty as a persistent variable.
-persistent penalty

-% Initialization of the persistent variable.
-if ~nargin || isempty(penalty)
-    penalty = 1e8;
-    if ~nargin, return, end
-end
-if nargin==1
-    penalty = xparam1;
-    return
-end
+% Persistent variable 'penalty' is used to compute an endogenous penalty to
+% the value 'fval' when various conditions are encountered. These conditions
+% set also 'exit_flag' equal to 0 instead of 1.  It is only when
+% dsge_likelihood() is called by an optimizer called by
+% dynare_estimation_1() that 'exit_flag' is ignored and penalized 'fval' is
+% actually used.  
+% In that case, 'penalty' is properly initialized, at the very end of the
+% present function, by a call to dsge_likelihood() made in
+% initial_estimation_checks(). If a condition triggers exit_flag ==
+% 0, initial_estimation_checks() triggers an error.
+% In summary, an initial call to the present function, without triggering
+% any condition, guarantees that 'penalty' is properly initialized when needed.
+
+persistent penalty

 % Initialization of the returned variables and others...
 fval        = [];
@@ -146,6 +150,21 @@ trend_coeff = [];
 exit_flag   = 1;
 info        = 0;
 singularity_flag = 0;
+DLIK        = [];
+AHess       = [];
+
+if DynareOptions.estimation_dll
+    [fval,exit_flag,ys,trend_coeff,info,params,H,Q] ...
+        = logposterior(xparam1,DynareDataset, DynareOptions,Model, ...
+                          EstimatedParameters,BayesInfo,DynareResults);
+    Model.params = params;
+    if ~isequal(Model.H,0)
+        Model.H = H;
+    end
+    Model.Sigma_e = Q;
+    DynareResults.dr.ys = ys;
+    return
+end

 % Set flag related to analytical derivatives.
 if nargout > 9
@@ -209,7 +228,7 @@ if EstimatedParameters.ncx
        a = diag(eig(Q));
        k = find(a < 0);
        if k > 0
-            fval = BayesInfo.penalty+sum(-a(k));
+            fval = penalty+sum(-a(k));
            exit_flag = 0;
            info = 43;
            return
@@ -233,7 +252,7 @@ if EstimatedParameters.ncn
        a = diag(eig(H));
        k = find(a < 0);
        if k > 0
-            fval = BayesInfo.penalty+sum(-a(k));
+            fval = penalty+sum(-a(k));
            exit_flag = 0;
            info = 44;
            return
@@ -339,13 +358,19 @@ end


 diffuse_periods = 0;
+correlated_errors_have_been_checked = 0;
+singular_diffuse_filter = 0;
 switch DynareOptions.lik_init
  case 1% Standard initialization with the steady state of the state equation.
    if kalman_algo~=2
        % Use standard kalman filter except if the univariate filter is explicitely choosen.
        kalman_algo = 1;
    end
-    Pstar = lyapunov_symm(T,R*Q*R',DynareOptions.qz_criterium,DynareOptions.lyapunov_complex_threshold);
+    if DynareOptions.lyapunov_fp == 1
+        Pstar = lyapunov_symm(T,Q,DynareOptions.qz_criterium,DynareOptions.lyapunov_complex_threshold, 4, R);
+    else
+        Pstar = lyapunov_symm(T,R*Q*R',DynareOptions.qz_criterium,DynareOptions.lyapunov_complex_threshold);
+    end;
    Pinf  = [];
    a     = zeros(mm,1);
    Zflag = 0;
@@ -359,10 +384,14 @@ switch DynareOptions.lik_init
    a     = zeros(mm,1);
    Zflag = 0;
  case 3% Diffuse Kalman filter (Durbin and Koopman)
-    if kalman_algo ~= 4
        % Use standard kalman filter except if the univariate filter is explicitely choosen.
+    if kalman_algo == 0
        kalman_algo = 3;
+    elseif ~((kalman_algo == 3) || (kalman_algo == 4)) 
+            error(['diffuse filter: options_.kalman_algo can only be equal ' ...
+                   'to 0 (default), 3 or 4'])
    end
+
    [Z,T,R,QT,Pstar,Pinf] = schur_statespace_transformation(Z,T,R,Q,DynareOptions.qz_criterium);
    Zflag = 1;
    % Run diffuse kalman filter on first periods.
@@ -383,39 +412,39 @@ switch DynareOptions.lik_init
        diffuse_periods = length(tmp);
        if isinf(dLIK)
            % Go to univariate diffuse filter if singularity problem.
-            kalman_algo = 4;
-            singularity_flag = 1;
+            singular_diffuse_filter = 1;
        end
    end
-    if (kalman_algo==4)
+    if singular_diffuse_filter || (kalman_algo==4)
        % Univariate Diffuse Kalman Filter
-        if singularity_flag
-            if isequal(H,0)
-                H = zeros(nobs,1);
-                mmm = mm;
+        if isequal(H,0)
+            H1 = zeros(nobs,1);
+            mmm = mm;
+        else
+            if all(all(abs(H-diag(diag(H)))<1e-14))% ie, the covariance matrix is diagonal...
+                H1 = diag(H);
+                mmm = mm; 
            else
-                if all(all(abs(H-diag(diag(H)))<1e-14))% ie, the covariance matrix is diagonal...
-                    H = diag(H);
-                    mmm = mm; 
-                else
-                    Z = [Z, eye(pp)];
-                    T = blkdiag(T,zeros(pp));
-                    Q = blkdiag(Q,H);
-                    R = blkdiag(R,eye(pp));
-                    Pstar = blkdiag(Pstar,H);
-                    Pinf  = blckdiag(Pinf,zeros(pp));
-                    H = zeros(nobs,1);
-                    mmm   = mm+pp;
-                end
+                Z = [Z, eye(pp)];
+                T = blkdiag(T,zeros(pp));
+                Q = blkdiag(Q,H);
+                R = blkdiag(R,eye(pp));
+                Pstar = blkdiag(Pstar,H);
+                Pinf  = blckdiag(Pinf,zeros(pp));
+                H1 = zeros(nobs,1);
+                mmm   = mm+pp;
            end
-            % no need to test again for correlation elements
-            singularity_flag = 0;
        end
-        [dLIK,tmp,a,Pstar] = univariate_kalman_filter_d(DynareDataset.missing.aindex,DynareDataset.missing.number_of_observations,DynareDataset.missing.no_more_missing_observations, ...
-                                                              Y, 1, size(Y,2), ...
-                                                              zeros(mmm,1), Pinf, Pstar, ...
-                                                              kalman_tol, riccati_tol, DynareOptions.presample, ...
-                                                              T,R,Q,H,Z,mmm,pp,rr);
+        % no need to test again for correlation elements
+        correlated_errors_have_been_checked = 1;
+
+        [dLIK,tmp,a,Pstar] = univariate_kalman_filter_d(DynareDataset.missing.aindex,...
+                                                        DynareDataset.missing.number_of_observations,...
+                                                        DynareDataset.missing.no_more_missing_observations, ...
+                                                        Y, 1, size(Y,2), ...
+                                                        zeros(mmm,1), Pinf, Pstar, ...
+                                                        kalman_tol, riccati_tol, DynareOptions.presample, ...
+                                                        T,R,Q,H1,Z,mmm,pp,rr);
        diffuse_periods = length(tmp);
    end
  case 4% Start from the solution of the Riccati equation.
@@ -586,7 +615,6 @@ if ((kalman_algo==1) || (kalman_algo==3))% Multivariate Kalman Filter
        else
            kalman_algo = 4;
        end
-        singularity_flag = 1;
    else
        if DynareOptions.lik_init==3
            LIK = LIK + dLIK;
@@ -594,10 +622,10 @@ if ((kalman_algo==1) || (kalman_algo==3))% Multivariate Kalman Filter
    end
 end

-if ( singularity_flag || (kalman_algo==2) || (kalman_algo==4) )
+if (kalman_algo==2) || (kalman_algo==4)
    % Univariate Kalman Filter
    % resetting measurement error covariance matrix when necessary                                                           % 
-    if singularity_flag
+    if ~correlated_errors_have_been_checked
        if isequal(H,0)
            H = zeros(nobs,1);
            mmm = mm;

--- a/matlab/DsgeLikelihood_hh.m
+++ b/matlab/DsgeLikelihood_hh.m
-function [fval,llik,cost_flag,ys,trend_coeff,info] = DsgeLikelihood_hh(xparam1,DynareDataset,DynareOptions,Model,EstimatedParameters,BayesInfo,DynareResults)
+function [fval,llik,cost_flag,ys,trend_coeff,info] = dsge_likelihood_hh(xparam1,DynareDataset,DynareOptions,Model,EstimatedParameters,BayesInfo,DynareResults)
 % function [fval,llik,cost_flag,ys,trend_coeff,info] = DsgeLikelihood_hh(xparam1,DynareDataset,DynareOptions,Model,EstimatedParameters,BayesInfo,DynareResults)
 % Evaluates the posterior kernel of a dsge model.
 %
@@ -41,17 +41,20 @@ function [fval,llik,cost_flag,ys,trend_coeff,info] = DsgeLikelihood_hh(xparam1,D


 % Declaration of the penalty as a persistent variable.
-persistent penalty

-% Initialization of the persistent variable.