Dear All
I have the following Equation in my paper using 3 Equation NK model. My question is on my model which the have the EM economies, being hit by forward guidance shock from the US. Is it OK to used the forward guidance shock as the dependent variable in the measurement equation.
Can you please elaborate. What do you mean with
?
In essence I wanted to estimate a core NK model and figuring out how to estimate the parameter that could relate to the FG shock from US Monetary policy. I am not sure if that is possible since in my experience in the past I usually relate the measurement equation into the model endogenous variable.
That is true, but there are cases where you have direct information on the exogenous variables. We discussed this here: Exogenous variable as observable variable in estimation - #2 by jpfeifer
Sorry for the oversight. Let me review the material and hope this clears my question.
