If the number of shocks is less than the observables(US data) in Bayesian estimation, for example, 5 shocks but 7 observables,
1.If I add two measurement errors, is there any drawbacks to do so?
2. Is it OK to add 7 measurement errors (like real business cycles in emerging countries)?
You can either run the identification command if the manually added the measurement error as “structural” shocks using varexo. Or you can look whether the mode_check-plots shock horizontal lines. However, the latter way would not detect collinearity between parameters.