Observed variables only be flow variables but not stock variables? thank you

Estimation ML/Bayesian estimation
1

Dear All,
I heard that observed variables in dsge model can only be flow variables, is this true? Can’t observed variables also include stock variables?
I am currently debugging my programs for my thesis, which is is due soon.
Thank you very much and look forward to hearing from you.
Best wishes,
Jesse

2

No, you can of course mix stock and flows, but the arising issues are somewhat tricky. You can find more details in Pfeifer(2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models”