Real business cycle in emerging countries

[jpfeifer]

1. You can do this by setting an upper bound, e.g. for the uniform distribution. Of course, you first need to compute the cutoff value based on the data’s variance.
2. Have a look at

Measurement error always hit upper bound

Unfortunately, this is a common problem. Any model misspecification is likely to turn up in the measurement error. As most models are severely misspecified, the estimated measurement error tends to be large. It regularly happens that measurement error hits the upper bound if the bound is relatively low. This for example happens in the Schmitt-Grohe/Uribe (2012) “What’s news in business cycles” paper and the Garcia-Cicco et al (2010) AER paper with the measurement error specified in the paper (se…

3. Have a look at the Notes in the file:

The standard deviations of the estimated measurement error reported in Table 3 of the paper are actually variances. This mod-file reflects this difference to the published version by taking the square root.