Re: how many measurement error would be best?
Posted: Sun Jan 24, 2016 7:01 pmThe picture is a bit strange, because it looks as if the measurement error accounts for more than 10% of the volatility.
Generally, a picture like this tells you that (believing that we do not mismeasure inflation that badly) your model is misspecified and thus has a hard time accounting for the movement of the observables with other types of shocks.
Generally, a picture like this tells you that (believing that we do not mismeasure inflation that badly) your model is misspecified and thus has a hard time accounting for the movement of the observables with other types of shocks.