Box cox transformation for autoregressive structure

Modeling
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1

Hello, Stan people,

I want to put an autoregressive structure on the variable u_t , which is however a positive continuous distribution (economic theory says that it should be positive as it is an inefficiency term).

However as I have time-series data, inefficiency must have an autoregressive structure (AR1). As I understand for this u_t needs to be normally distributed for the error to be normal (unless there is a way in stan to put an autoregressive structure on a positive distribution). What I have is a gamma distribution for u_t.
I have used box-cox transformation in the hope of converting u_t into normal and then estimating the autoregressive function.
But I am getting error “Chain 1: Exception: normal_lpdf: Random variable[2] is nan, but must not be nan! (in ‘model464555525d_YEARLY_IDF’ at line 43)”.

Does anybody have any idea of how I can resolve this issue or another way of putting an autoregressive structure on positive continuous distribution?

Any assistance will be greatly appreciated.

data {
  int<lower=1> N;// Number of observations
  int<lower=1> P; // Number of predictors in main regression
  vector [N]Y; // dependent variables
    int<lower=0> T; // Number of time period in main regression
  matrix[N,P] X; // matrix of independent variables
int<lower=1,upper=T> TIME[N];
}

parameters {
  real alpha;
  vector[P] beta;
    real<lower=0> sigma;
    vector<lower=0>[N]u_t;
 	real lambda;
 		real delta;
 	 real<lower=0> phi;
 	 real<lower=0> rho;
}

transformed parameters {
  vector[N] yhat;
real one_minus_rho_sq;
real u1_mean;
real u1_sigma; 
  one_minus_rho_sq = (1 - rho) * (1 + rho);
u1_mean = delta /(1 - rho);
u1_sigma = phi /sqrt(one_minus_rho_sq);
 
    yhat =   alpha+X*beta - u_t;

}
model {
     vector[N] u_pow;

    for (n in 1:N) {
    u_pow[n] = u_t[n]^lambda;
    if(TIME[n] == 1){

line 43->      target +=normal_lpdf( (u_pow - 1) / lambda |u1_mean , u1_sigma) ;
            }
            else {
             target +=normal_lpdf( (u_pow - 1) / lambda | delta+ rho* u_t[n-1], phi) ; 
            }
                target += (lambda - 1) * sum(log(u_t));
        }


delta ~ normal(0,1);
phi ~ gamma(1,1);
sigma ~ gamma(1,1);
alpha ~ normal(0,1);
beta ~normal(0,1);
rho ~ normal(0,1);

lambda ~ normal (0,1);


u_t ~ gamma(1,1);

 Y ~ normal(yhat  , sigma);
  
}



  
generated quantities {
    vector[N] SRTE;
    SRTE = exp(-u_t);
}
1 Like
2

The Box-Cox transformation that ensures positivity arises in the limit \lambda \rightarrow 0, i.e. log(y), but implementing that limit requires careful analytical cancelations.

Perhaps more importantly Box-Cox transformations are designed to be applied to the observed variables and not the parameters. For example a common approach to modeling positively-constrained data is to model the log of the observations which are unconstrained,

\log(y_t) \sim \text{normal}(\alpha + X \cdot \beta - u_t, \sigma).

This is also equivalent to modeling y_t with a log normal normal.

1 Like
3

Thank you kindly for your advice.