Dear jpfeifer,

Thank you very much for your paper, “A Guide to Specifying Observation Equations for the Estimation of DSGE Models”. I found it very useful.

I have a question with reference to the question by Gildenberg and your answer above. I have looked into listing 3 as you have advised, and there the steady state values of the non-linear model have been derived analytically. However, in my model I cannot derive them analytically and I use fsolve in Matlab to find the steady state values. Afterwards, I import the numerical values of the non-linear steady states as parameters into the mod file, where the equations are log-linearised. So, my understanding is that if I estimate deep parameters in this model as it is, the estimated parameters would not be correct as the parameters depending on non-linear steady states are not updated during Bayesian estimation steps.

Can I please ask whether my understanding is correct, and if so whether there is any work-around to estimate deep parameters of the model using log-linearised model? I believe, I can use the non-linear model itself and use an external steady state file so that this issue is not there anymore, but want to know whether there is any other method please.

Thank you very much.