I am estimating a standard RE model
x(1) = a11x + a12y(-1) + a13eps;
y = a21x + a22y(-1) + a23eta;
I specify priors in the for of (for example)
where a110, as I understand, is used to compute initial likelihood. Suppose the Blanchard-Kahn conditions are satisfied for a110 (and other initial values). Does this imply that posterior distributions are such that the Blanchard-Kahn conditions are satisfied? When the dynare takes a random draw of aij coefficients and finds that BK conditions are NOT satisfied, what does it do? Since it never crashes I suspect it assumes the likelihood is minus (or plus) large number and ignores this combination. Am I right?