Market clearing equation and associated dilemma in estimation

Hello people,

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 ?

Make all three observed and add measurement error on investment. Then try what happens.

Hello Professor,

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?

BE_corrected_rpc_diffeuler_uadg_diff.mod (17.6 KB)

That’s hard to tell. Why do you have three capital stocks?