Dynare forums

Dear all,

I am new to Dynare (am using Dynare v3) and I appreciate your advice on my following questions.

I am learning to estimate a DSGE model, but the number of structural shocks is smaller than the number of observables. In that case, I need to specify measurement errors. I am not sure how to do it as from the textbook I need to find the decision rules for the observables first before adding the measurement errors. How can I possibly do it in Dynare? I have searched through the whole user guide and I still have no clue how to do it.

Thank you very much for your help in advance!

Yours,
JCW

The trick is to tell Dynare that you want to estimate the variance/stderr on some observable variable in the estimated_params block.
Dynare will understand that you are not estimating the variance of the variable itself, but only the variance of the measurement error.

Best,