diff --git a/matlab/ms-sbvar/initialize_ms_sbvar_options.m b/matlab/ms-sbvar/initialize_ms_sbvar_options.m
index 889bc8fe18e2fdd5d005f8db916c469d5aad4fa7..a616b48312d3da33b56235d921ac7e7255f217da 100644
--- a/matlab/ms-sbvar/initialize_ms_sbvar_options.m
+++ b/matlab/ms-sbvar/initialize_ms_sbvar_options.m
@@ -59,7 +59,6 @@ options_.ms.contemp_reduced_form = 0;
 options_.ms.bayesian_prior = 1;
 options_.ms.alpha = 1;
 options_.ms.beta = 1;
-options_.ms.gsig2_lmd = 50^2;
 options_.ms.gsig2_lmdm = 50^2;
 if isfield(options_.ms,'initial_year')
     options_.ms = rmfield(options_.ms,'initial_year');
diff --git a/preprocessor/DynareBison.yy b/preprocessor/DynareBison.yy
index 133fad2beb280462e468dd48b93036791145adae..d174955b3a99810b371210547cee644a2f086613 100644
--- a/preprocessor/DynareBison.yy
+++ b/preprocessor/DynareBison.yy
@@ -147,7 +147,7 @@ class ParsingDriver;
 %token RESTRICTIONS RESTRICTION_FNAME CROSS_RESTRICTIONS NLAGS CONTEMP_REDUCED_FORM REAL_PSEUDO_FORECAST 
 %token DUMMY_OBS NSTATES INDXSCALESSTATES NO_BAYESIAN_PRIOR
 %token <string_val> ALPHA BETA ABAND NINV CMS NCMS CNUM
-%token GSIG2_LMD GSIG2_LMDM Q_DIAG FLAT_PRIOR NCSK NSTD
+%token GSIG2_LMDM Q_DIAG FLAT_PRIOR NCSK NSTD
 %token INDXPARR INDXOVR INDXAP APBAND INDXIMF IMFBAND INDXFORE FOREBAND INDXGFOREHAT INDXGIMFHAT
 %token INDXESTIMA INDXGDLS EQ_MS FILTER_COVARIANCE FILTER_DECOMPOSITION
 %token EQ_CMS TLINDX TLNUMBER BANACT
@@ -1441,7 +1441,6 @@ sbvar_option : o_datafile
              | o_indxscalesstates
              | o_alpha
              | o_beta
-             | o_gsig2_lmd
              | o_gsig2_lmdm
              | o_q_diag
              | o_flat_prior
@@ -1626,7 +1625,6 @@ ms_estimation_option : o_coefficients_prior_hyperparameters
                      | o_no_bayesian_prior
                      | o_alpha
                      | o_beta
-                     | o_gsig2_lmd
                      | o_gsig2_lmdm
                      | o_output_file_tag
                      | o_file_tag
@@ -2014,7 +2012,6 @@ o_nstates : NSTATES EQUAL INT_NUMBER {driver.option_num("ms.nstates",$3); };
 o_indxscalesstates : INDXSCALESSTATES EQUAL INT_NUMBER {driver.option_num("ms.indxscalesstates",$3); };
 o_alpha : ALPHA EQUAL non_negative_number {driver.option_num("ms.alpha",$3); };
 o_beta : BETA EQUAL non_negative_number {driver.option_num("ms.beta",$3); };
-o_gsig2_lmd : GSIG2_LMD EQUAL INT_NUMBER {driver.option_num("ms.gsig2_lmd",$3); };
 o_gsig2_lmdm : GSIG2_LMDM EQUAL INT_NUMBER {driver.option_num("ms.gsig2_lmdm",$3); };
 o_q_diag : Q_DIAG EQUAL non_negative_number {driver.option_num("ms.q_diag",$3); };
 o_flat_prior : FLAT_PRIOR EQUAL INT_NUMBER {driver.option_num("ms.flat_prior",$3); };
diff --git a/preprocessor/DynareFlex.ll b/preprocessor/DynareFlex.ll
index 1594ef5376192f0cdc434baa26c48fdf1c02bf4f..e9d462580b9ddbdd53ed9ba9b99fba18777b03de 100644
--- a/preprocessor/DynareFlex.ll
+++ b/preprocessor/DynareFlex.ll
@@ -274,7 +274,6 @@ string eofbuff;
   yylval->string_val = new string(yytext);
   return token::BETA;
 }
-<DYNARE_STATEMENT>gsig2_lmd {return token::GSIG2_LMD;}
 <DYNARE_STATEMENT>gsig2_lmdm {return token::GSIG2_LMDM;}
 <DYNARE_STATEMENT>q_diag {return token::Q_DIAG;}
 <DYNARE_STATEMENT>flat_prior {return token::FLAT_PRIOR;}