Gathering Data and Replicating Gali (2008)

[jpfeifer]

1. What do you mean with replicate? Those models in the book were never estimated.
2. One previous comment of mine comes to mind:

Bachelor students are not supposed to work on models that complicated without intense supervision. I have seen too many cases like this miserably fail. Most of the time, the goals set are too unrealistic given the prior training and the time frame envisioned.

If you want to go down that road of estimation without the proper training, be warned. You may want to start with Pfeifer(2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models”

Also :

More shocks than observable variables -- what to do?

Dear Maureen, sorry, I forgot that Smets/Wouters do not have measurement error. Regarding your question: It clearly does not matter.The only condition is that you have at least as many disturbances as you have observed series as otherwise stochastic singularity would occur. That’s the reason why Smets/Wouters match the number of shocks to the number of variables. There is for example the Schmitt-Grohe/Uribe (2009)-paper “What’s news in business cycles?”. They have several exogenous disturbances…