Hello!
I have got a question concerning the definition of shocks in bayesian estimations. Having read several posts from this forum I have realized that some mod-files define the shock processes in separate shock blocks, others do not. In the user guide example attached below, for example, the variance of e is not defined. However, it can be estimated perfectly.
I thought that for estimating a model it is necessary to include at least as many shocks as observable variables in order to achieve nonsingularity in the forecast errors. Doesn't that mean that I have to define the shocks in a separate shocks block, as in the case where we simulate the model without using data? And if not, why does the User guide example run then and other models don't because of singularity in the forecast errors?
Does it depend on the computing mode?
Thanks in advance for your replies!
Greets