Since we cannot estimate all the components of market clearing equation (Y=C+I+G). I have made Y, C and I as observed variable. But in this case, whole of my G dynamics remains un-captured. The mode-check plots also suggests that G is not identified from the data at all. I am surprised why this is happening!
What is the way out? Should I make C, I and G as observed ?
I dont know by why blanchard kahn conditions are not satisfied in my model. When I make K_n and K_p (capital) non-predetermined, code runs well. I dont have any other pre-determined variable. How should I debugg?
Because one capital (k) pertains to normal price rigid model block, other (k_n) pertains to flexible price equilibrium and (k_p) pertains to model block where all dynamics is due to only persistent growth rate shocks.