Dear all,
I have a code in DYNARE which makes Bayesian estimation of an RBC model. I set the observable variables to be composed by investments, output, hours, utilization and capital.
I add the "smoother" command in the estimation to get the estimates of all endogenous variables of the model. After running the code, I notice that the estimation for capital is quite far from the observed variable (even if this is given as observable!). I suspect that this is due to a high "observation error". Would it be possible in DYNARE to set this observation error close to zero? And, if yes, how?
Thank you.
Alice