I have a question on the procedure of estimating a DSGE VAR model.
My current setup
I have a model with 73 variables.
I estimated the model with 26 observed variables and the estimation ran without any problems.
How I am thinking of estimating a DSGE VAR of this model.
- Estimate the model with 26 observed variables
- Then simulate the model
- Save the Simulated data to a file (it will contain 73 variables)
- Create a DSGE-VAR model. which is just the original model with new shocks added to match the shock count to the obs variable count (73 now)
- Estimate the DSGE-VAR using the simulated data as the observed data
Is this the correct way to doing this or did I get it wrong?
I wish to thank you in advance for sharing your insights.