Nonlinear Optimization Examples |
The following example and notation are taken from Bard (1974).
A two-equation model is used to fit U.S. production data
for the years 1909 - 1949, where is capital input,
is labor input,
is real output,
is
time in years (with 1929 as the origin), and
is
the ratio of price of capital services to wage scale. The
data can be entered by using the following statements:
proc iml; z={ 1.33135 0.64629 0.4026 -20 0.24447, 1.39235 0.66302 0.4084 -19 0.23454, 1.41640 0.65272 0.4223 -18 0.23206, 1.48773 0.67318 0.4389 -17 0.22291, 1.51015 0.67720 0.4605 -16 0.22487, 1.43385 0.65175 0.4445 -15 0.21879, 1.48188 0.65570 0.4387 -14 0.23203, 1.67115 0.71417 0.4999 -13 0.23828, 1.71327 0.77524 0.5264 -12 0.26571, 1.76412 0.79465 0.5793 -11 0.23410, 1.76869 0.71607 0.5492 -10 0.22181, 1.80776 0.70068 0.5052 -9 0.18157, 1.54947 0.60764 0.4679 -8 0.22931, 1.66933 0.67041 0.5283 -7 0.20595, 1.93377 0.74091 0.5994 -6 0.19472, 1.95460 0.71336 0.5964 -5 0.17981, 2.11198 0.75159 0.6554 -4 0.18010, 2.26266 0.78838 0.6851 -3 0.16933, 2.33228 0.79600 0.6933 -2 0.16279, 2.43980 0.80788 0.7061 -1 0.16906, 2.58714 0.84547 0.7567 0 0.16239, 2.54865 0.77232 0.6796 1 0.16103, 2.26042 0.67880 0.6136 2 0.14456, 1.91974 0.58529 0.5145 3 0.20079, 1.80000 0.58065 0.5046 4 0.18307, 1.86020 0.62007 0.5711 5 0.18352, 1.88201 0.65575 0.6184 6 0.18847, 1.97018 0.72433 0.7113 7 0.20415, 2.08232 0.76838 0.7461 8 0.18847, 1.94062 0.69806 0.6981 9 0.17800, 1.98646 0.74679 0.7722 10 0.19979, 2.07987 0.79083 0.8557 11 0.21115, 2.28232 0.88462 0.9925 12 0.23453, 2.52779 0.95750 1.0877 13 0.20937, 2.62747 1.00285 1.1834 14 0.19843, 2.61235 0.99329 1.2565 15 0.18898, 2.52320 0.94857 1.2293 16 0.17203, 2.44632 0.97853 1.1889 17 0.18140, 2.56478 1.02591 1.2249 18 0.19431, 2.64588 1.03760 1.2669 19 0.19492, 2.69105 0.99669 1.2708 20 0.17912 };
The two-equation model in five parameters is
where the variables and
are considered
dependent (endogenous) and the variables
,
,
and
are considered independent (exogenous).
Differentiation of the two equations and
with
respect to the endogenous variables
and
yields
the Jacobian matrix
for
and
, where
corresponds to rows (equations) and
corresponds to endogenous variables (refer to Bard 1974).
You must consider parameter sets for which the elements of the
Jacobian and the logarithm of the determinant cannot be computed.
In such cases, the function module must return a missing value.
Here is the code:
start fiml(pr) global(z); c1 = pr[1]; c2 = pr[2]; c3 = pr[3]; c4 = pr[4]; c5 = pr[5]; /* 1. Compute Jacobian */ lndet = 0 ; do t= 1 to 41; j11 = (-c3/c4) * c1 * 10 ##(c2 * z[t,4]) * (-c4) * c5 * z[t,1]##(-c4-1) * (c5 * z[t,1]##(-c4) + (1-c5) * z[t,2]##(-c4))##(-c3/c4 -1); j12 = (-c3/c4) * (-c4) * c1 * 10 ##(c2 * z[t,4]) * (1-c5) * z[t,2]##(-c4-1) * (c5 * z[t,1]##(-c4) + (1-c5) * z[t,2]##(-c4))##(-c3/c4 -1); j21 = (-1-c4)*(c5/(1-c5))*z[t,1]##( -2-c4)/ (z[t,2]##(-1-c4)); j22 = (1+c4)*(c5/(1-c5))*z[t,1]##( -1-c4)/ (z[t,2]##(-c4)); j = (j11 || j12 ) // (j21 || j22) ; if any(j = .) then detj = 0.; else detj = det(j); if abs(detj) < 1.e-30 then do; print t detj j; return(.); end; lndet = lndet + log(abs(detj)); end;
Assuming that the residuals of the two equations are normally distributed, the likelihood is then computed as in Bard (1974). The following code computes the logarithm of the likelihood function:
/* 2. Compute Sigma */ sb = j(2,2,0.); do t= 1 to 41; eq_g1 = c1 * 10##(c2 * z[t,4]) * (c5*z[t,1]##(-c4) + (1-c5)*z[t,2]##(-c4))##(-c3/c4) - z[t,3]; eq_g2 = (c5/(1-c5)) * (z[t,1] / z[t,2])##(-1-c4) - z[t,5]; resid = eq_g1 // eq_g2; sb = sb + resid * resid`; end; sb = sb / 41; /* 3. Compute log L */ const = 41. * (log(2 * 3.1415) + 1.); lnds = 0.5 * 41 * log(det(sb)); logl = const - lndet + lnds; return(logl); finish fiml;
There are potential problems in computing the power and log functions for an unrestricted parameter set. As a result, optimization algorithms that use line search fail more often than algorithms that restrict the search area. For that reason, the NLPDD subroutine is used in the following code to maximize the log-likelihood function:
pr = j(1,5,0.001); optn = {0 2}; tc = {. . . 0}; call nlpdd(rc, xr,"fiml", pr, optn,,tc); print "Start" pr, "RC=" rc, "Opt Par" xr;
Part of the iteration history is shown in Output 11.7.1.
The results are very close to those reported by Bard (1974).
Bard also reports different approaches to the
same problem that can lead to very different MLEs.
|
Optimization Results | |||
Parameter Estimates | |||
N | Parameter | Estimate | Gradient Objective Function |
1 | X1 | 0.583884 | -0.000004817 |
2 | X2 | 0.005882 | 0.000011377 |
3 | X3 | 1.362817 | -0.000003229 |
4 | X4 | 0.475091 | -0.000018103 |
5 | X5 | 0.447072 | 0.000119 |
Value of Objective Function = -110.7785811 |
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