I am currently estimating a model featuring an endogenous DSGE economy, together with an exogenous rest of the world block, modelled as a VAR.
The model is input in its non-linear form and I am using an external steady state file.
My question is the following: when running estimation, how can I make sure that the draws of the VAR coefficients are such that they don’t violate B-K conditions?
Or, to put it differently, how can I make sure I am disregarding parameters draws that make the VAR unstable?
Should I insert in the steady state file something like:
Where unstable is a boolean set to 1 any time coefficients draw makes the VAR unstable.
Is this the way to go? Or do you have any other suggestions? Files are attached below
Thanks in advance for your time!
ScotModelTest.mod (39.0 KB)
modeldata.xlsx (71.0 KB)
SS_Solver.m (2.4 KB)
ScotModelTest_steadystate.m (5.1 KB)