# Procedure of Estimating a DSGE-VAR model

**URL:** https://forum.dynare.org/t/procedure-of-estimating-a-dsge-var-model/5086
**Category:** DSGE-VAR
**Created:** [1 November 2015 03:52 UTC](https://forum.dynare.org/t/procedure-of-estimating-a-dsge-var-model/5086 "2015-11-01T03:52:12Z")
**Posts on this page:** 2
**Page:** 1

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### Author: ![rwhitt01](https://forum.dynare.org/letter_avatar_proxy/v4/letter/r/a587f6/32.png) [@rwhitt01](https://forum.dynare.org/u/rwhitt01)
#### Post date: [1 November 2015 03:52 UTC](https://forum.dynare.org/t/procedure-of-estimating-a-dsge-var-model/5086/1 "2015-11-01T03:52:12Z")

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Hello Everyone,

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.

1. Estimate the model with 26 observed variables
2. Then simulate the model
3. Save the Simulated data to a file (it will contain 73 variables)
4. 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)
5. 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.

Regards,  
Richard

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### Author: ![stepan-a](https://forum.dynare.org/user_avatar/forum.dynare.org/stepan-a/32/6652_2.png) [@stepan-a](https://forum.dynare.org/u/stepan-a)
#### Post date: [2 August 2017 13:14 UTC](https://forum.dynare.org/t/procedure-of-estimating-a-dsge-var-model/5086/2 "2017-08-02T13:14:42Z")

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Dear Richard,

You do not need all these steps.You do not need to turn your model into a VAR, adding all these shocks, to estimate a DSGE-VAR model. The idea here is to use a DSGE model to formulate a prior on the autoregressive matrices (and covariance matrix of the errors), not to estimate a VAR with all the variables of your DSGE model.

So you can keep the set of observed variables, just add the option `doge_var` in the `estimation` command, see the reference manual [here](http://www.dynare.org/manual/index_28.html). The only constraint is that you must have as many shocks as observed variables.Usually it is much easier to estimate a DSGE-VAR model than a DSGE model, and it is also much faster (because we do not need to run a Kalman filter to evaluate the likelihood).

Best,  
Stéphane.